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MIDLAND WORKERS' 
LIBRARY 

Its DALE END - BIRMINGHAM 4 | 



Rw9nt9d by.. 



p. C.^:.. 



J 





DEMOCRACY VERSUS SOCIALISM 



DEMOCRACY 



VERSUS 



SOCIALISM 

A CRITICAL EXAMINATION OF SOCIAUSM 

AS A REMEDY FOR SOCIAL INJUSTICE 

AND AN EXPOSITION OF THE 

SINGLE TAX DOCTRINE 



BY 



MAX HIRSCH (Melbourne) 



MACMILLAN AND CO., Limited 

NEW YORK : THE MACMILLAN COMPANY 

I9OI 

j§Jl right ratmttd 



TO THE MEMORY OF 

HENRY GEORGE, 

PROPHET AND MARTYR OF A NEW AND HIGHER FAITH, 

THIS WORK IS 
GRATEFULLY DEDICATED 



PREFACE 

A MOVEMENT which draws its vitality, as Socialism does, 
from the poverty and haunting sense of injustice of its 
rank and file, and from the moral elevation and unselfish 
pity of the leaders, cannot be successfully met even by the 
most triumphant demonstration of the impracticability of 
the remedies which it proposes. 

Revolting against the injustice of existing social 
arrangements and the evils thence resulting, preferring 
the risk of failure to ignoble acquiescence, the advocates 
of Socialism are, not unnaturally, deaf to merely negative 
criticism. 

It has seemed to me that this is the main reason why 
the many and able expositions of the impracticability of 
the industrial proposals of Socialism have failed to 
exercise any marked retarding influence upon its pro- 
gress. Necessary and beneficial as such expositions are, 
they do not touch the heart of the matter. Failing to 
probe the socialist creed to its bottom, they do not 
show that it is based on an insufficient and faulty 
analysis of the causes of social injustice. Disregarding 
the legitimacy of the social revolt which has taken the 
form of Socialism, they fail to suggest any alternative 
method for the removal of the evils which have pro- 
voked it. 

az 



viii DEMOCRACY VERSUS SOCIALISM 

It has seemed to me that greater success might be 
achieved by acting upon these considerations. More- 
over, there does not, as far as I know, exist any work 
dealing with Socialism as a whole. 

Able examinations of its industrial proposals abound ; 
refutations of some or another of its economic and 
ethical conceptions can be found here and there in 
works the main purpose of which lies in other direc- 
tions. But I have not been able to find any work 
dealing with these conceptions and proposals as a 
whole. 

I have therefore endeavoured to fill this void. The 
first part of this book is devoted to an analysis of the 
teaching embodied in Socialism, exhibiting its leading 
principles and conceptions and the changes in social 
arrangements which must directly result from their 
application. The second and third part expose the 
erroneous nature of the economic and ethical concep- 
tions of Socialism, and exhibit what I regard to be 
the true principles of social economy and ethics. 

The fourth part exhibits the conflict between the 
industrial and distributive proposals of Socialism and 
the principles thus established as well as the disastrous 
consequences which must arise from the acceptance of 
the former. 

In the fifth and concluding part I have endeavoured 
to depict and vindicate the social reforms necessary to 
bring our social system into harmony with these economic 
and ethical principles, as well as their sufficiency for 
the achievement of the ultimate object of Socialism 
and Individualism alike, the establishment of social 
justice. 



PREFACE ix 

In carrying out these objects I have drawn freely 
on the great modern exponents of political economy 
and ethics, especially on the writings of Henry George, 
Bohm-Bawerk, and Herbert Spencer. While grate- 
fully acknowledging my indebtedness to them, I may 
nevertheless claim to have contributed some original 
matter to the treatment of the subject — matter which, I 
trust, may stand the test of criticism even where it 
embodies conclusions which differ from those arrived at 
by these authorities. 

To many friends my thanks are due for valuable 
assistance graciously rendered in preparing this work for 
the press ; to none more, however, than to Mr. R. J. 
JefFhiy, of London, who, in order to hasten its appearance, 
has undertaken the laborious task of revising the proofs. 

Melbourne, March 1901. 



CONTENTS 



INTRODUCTION 



Existing social conditions and tendencies — Undeserved poverty — The 
concentration of wealth — The social problem defined — The 
attractiveness of Socialism — The progress of Socialism — The 
general character of Socialism Pages zxix-xxxiv 



PART I 

AN ANALYSIS OF SOCIALISM 

CHAPTER I 

The Economic Conceptions 

Karl Marx's theories of value and surplus- value — The failure of com- 
petition as an industrial regulator — The evil of competition qua 
competition — The reconciliation of these two views — The 
individualistic view of competition . .3-11 

CHAPTER II 

The Industrial Proposals 

State-ownership and management of industry — Reconciliation of 
apparently conflicting socialist declarations — The abolition of 
rent and interest — Consequential extensions of these pro- 
posals ....... 12-23 



xii DEMOCRACY VERSUS SOCIALISM 



CHAPTER III 

The Industrial Proposals — Continued 

The methods of transferring land, capital, and industries to the State — 
Examination and reconciliation of conflicting methods — Further 
consequential changes in industrial organisation — The division of 
authority between local and central government — The organisa- 
tion of labour — Persistence of private ownership in consumption- 
goods and of rent — Definition of the industrial proposals of 
Socialism ..... Pages 24.-32 

• 

CHAPTER IV 

The Ethical Conceptions 

The denial of natural rights — Its necessary consequence of the indus- 
trial and distributive proposals of Socialism — The denial of 
individual rights to labour-products — The reasoning upon which 
it is based : (i) The impossibility under modern industrial con- 
ditions of determining the part or part-value of any industrial 
product due to the labour of any particular individual ; (2) The 
inequity of individuals benefiting by their special capacity and 
industry, these being due to heredity — The inequity of individuals 
benefiting directly by their use of social opportunities . 33-39 

CHAPTER V 

The Distributive Proposals 

Justice in distribution, the original object in Socialism — Disagreement 
amongst socialists as to what constitutes justice — Examination of 
the various systems of distribution open to Socialism — The 
impossibility of determining individual services and the value 
of products under Socialism otherwise than by the arbitrary 
decision of State officials — Equal distribution in value, the system 
which offers least difficulties and finds the greatest support — The 
consequential alterations arising from distribution of equal values 
in the organisation of science, art, literature, the professions, and 
domestic service ...... 40-46 



k 



CONTENTS xiii 

CHAPTER VI 

Modifications of Family Relations 

Economic independence of women — ^Abandonment of separate family 
homes — Transference of children to the care of the State at an 
early age ...... Pages 47-48 

CHAPTER VII 

The Political Conception 

Political equality — The abolition of hereditary aristocracy and mon- 
archy — The extension of the function of local governments — 
Centralisation — Internationalism .... 49-51 

CHAPTER VIII 

Is Socialism Scientific ? 

The nature of science — Socialism empirical on account of its denial of 
any natural law of distribution and of natural ethics . 52-53 

CHAPTER IX 

The Definition of Socialism . 54-55 



PART II 
ECONOMICS 

CHAPTER I 

Marx's Theory of Value 

Every politico-economic theory is based on some conception of value 
— Marx's theory of value stated — Its contradictions exposed 
{a) with regard to goods, (i) with regard to labour — The theory 
tested deductively — Socialists who repudiate the theory, never- 
theless accept Marx's deduction from it . . . 59-68 



xiv DEMOCRACY VERSUS SOCIALISM 



CHAPTER II 

The Quantitativb Theory of Value 

Professor W. S. Jevons's theory — The Austrian theory — Desire and 
utility — The condition which confers value on useful things — 
The classification of utilities — Value is determined by the 
urgency of desire, not by its kind — The Robinson Crusoe example 
— Value of consumption -goods determined by their marginal 
utility — ^Value of production-goods determined by the marginal 
utility of their ultimate products — The relation of value to cost 
of production ..... Pages 69-76 



CHAPTER III 

Origin and Nature of Capital 

Socialist definitions of capital — Their absurdities and contradictions — 
The origin of capital and its function in the co-operative process 
of production — The increased yield from the extension of pro- 
ductive processes in time — The function of exchange in co- 
operative production — The nature of capital defined — The 
ownership of capital — The organisation of capitalist industry 

77-90 



CHAPTER IV 

The Origin and Nature of Spurious Capital and Spurious 

Interest — Debts and Monopolies 

The points of resemblance between real and spurious capital — The 
differences between rights of debt and real capital — The essential 
character of monopolies — Monopoly in land — Monopoly in fran- 
chises — Differentiation between monopoly- value and capital-value 
in the same undertaking — Comparison of the effect of special and 
of exclusive legal privileges . . . 91-100 



CONTENTS XV 



CHAPTER V 

The Origin and Nature of Spurious Capital and Spurious 

Interest — Continued 

Industrial monopolies^ — The socialist view of industrial monopolies — 
Industrial monopolies based on legal privileges^ — Protectionism 
the fruitful source of industrial monopoly — Monopolies which 
arise from the co-operation of two or more legal privileges — 
Monopoly of unprivileged industries arising from the support of 
privileged industries — The conversion of monopoly- rights into 
spurious capital .... Pages 101-112 



CHAPTER VI 

A Comparison of Real with Spurious Capital 

Spurious capital would disappear with the repeal of laws conferring 
special privileges — ^All real capital ephemeral ; spurious capital 
may continue for ever and accumulates — Social progress tending 
to reduce value of real capital, increases the value of spurious 
capital — The greater part of existing capital is spurious capital 

113-117 

CHAPTER VII 

Surplus-Value 

Marx's theory of surplus-value disproved by the disproval of his theory 
of value — Examples of surplus-value further disproving his theory 

II 8-1 2 1 

CHAPTER VIII 

Land and Rent 

The twofold meaning of the term " land " — Space and time — Space 
as affecting the use of land — Natural and social variations in the 
productivity of land — Conditions which favour the concentration 



xvi DEMOCRACY VERSUS SOCIALISM 

of exertion upon land — Influence of these conditions and vari- 
ations upon the distribution of wealth — The limitation of 
Ricardo's Law of Rent and the Malthusian doctrine — The law 
extended — ^Natural rent arises from the extension of labour in 
space — Spurious rent rfie result of private ownership of land — 
Private appropriation of rent destructive of the economic and 
ethical functions of rent . . . . Pages 122-134 



CHAPTER IX 
The Theory of Interest 

Present wants mostly supplied by past labour, while present labour is 
mostly directed to the satisfaction of future wants — Goods avail- 
able at present valued more highly than like goods which be- 
come available in the future, on account of {a) differences in 
the provision for wants, {i) under - estimation of future wants, 
(r) technical superiority of present goods — Loans resulting from 
individual differences in the relative valuation of present and 
future goods — Averages of such valuations produce rates of interest 
— The tendency towards lowering the rate of interest — Interest 
is the increment of value arising during the growth of future 
into present goods, />. arises from the extension of labour in 
time ...... 135-143 



CHAPTER X 

The Wages of Labour 

« 

Natural rent not a deduction from individual wages, but a social fund 
— Natural interest not a deduction from individual labour, nor a 
common fund — Illustrations — The function of the capitalist 
which entitles him to interest — Wages consist of all the produce 
of labour — The minimum and maximum wages of labour — Why 
labour, under just legal conditions, is more powerful than capital, 
and must obtain maximum wages — The tribute exacted from 
labour by monopoly, and by unpri\'ileged employers when 
monopoly prevails — Influence of monopoly on production and 
the demand for labour — Under-consumption — Unemployment 
and commercial crises .... 144-160 



CONTENTS xvii 

CHAPTER XI 

The Component Parts of Surplus- Value 

Surplas-value arises partly from natural law, partly from legal enact- 
ments — The action of each of its component parts on the distri- 
bution of wealth — Impossibility of abolishing rent and interest — 
Rent can be made common property ; interest cannot be made 
common property — The private appropriation of interest just 
and innocuous ; the private appropriation of rent unjust and 
harmful— The unscientific character of the economic basis of 
Socialism ..... Pages 161-165 

CHAPTER XII 

CoMPETrnoN 

Competition an inherent necessity of life — Industrial competition 
twofold : (j) in which the number of prizes is less than that of 
competitors ; (^) in which the prizes are equal to the number of 
competitors, but of varying value — The latter kind predominates 
— Competition the only means of ensuring efficiency of service 
and equality of reward to service rendered — Scarcity of employ- 
ment alters character of industrial competition — ^The removal of 
causes productive of scarcity of employment a social necessity, 
not the removal of competition . . . 166-174 



PART III 
ETHICS 

CHAPTER I 

The Denial of Natural Rights 

The fundamental ethical conception of Socialism — The meaning of 
the conception made clear — The denial of natural rights con- 
tradicted by other fundamental conceptions of Socialism : {a) 
the duty of the State to secure happiness ; (i) the claim of 



xviii DEMOCRACY VERSUS SOCIALISM 

majority rule ; (r) the assertion of the injustice of existing con- 
ditions — The denial examined deductively — Murder and theft 
condemned for other reasons than the prohibition of the State — 
Certain rights universally recognised, and recognised more fully 
as societies evolve — The State unable to alter the sequences of its 
acts — The origin and nature of rights . . Pages 177-185 



CHAPTER II 

Happiness or Justice 

The universal relation between the discharge of functions and sensa- 
sations — Happiness consists of the due discharge of all functions 
— Freedom to exercise all faculties the first requisite of happiness 
— Equal freedom, i,e, justice the condition for the greatest aggre- 
gate sum of happiness — Happiness cannot be distributed — Equal 
distribution of means to happiness cannot secure the greatest sum 
of happiness — Justice, securing equal rights to all, alone can 
result in greatest sum of happiness — The relativity of sensarions 
to individual organisms and to the state of such organisms, and 
consequent impossibility of governmental determinations of acts 
conducive to general happiness — ^Justice a more intelligible aim 
than happiness ..... 186-194 

CHAPTER III 

The Origin and Growth of Law 

Recognition of individual rights precedes the State and the formulation 
of laws — Leges Barbarorum are collections of pre-existing tribal 
customs — The growth of custom among Teutonic tribes — Growth 
of the Feudal Law, the Canon Law, and the Law of Merchants — 
The development of the Common Law and of Equity in England 
— The growth and codification of laws in Germany and France — 
Laws were declared by authority, but not made by it 195-206 

CHAPTER IV 

Natural Rights 

The limit of State interference with individual action — Undisputed 
natural rights . . . . .207 



\ 



CONTENTS xix 

CHAPTER V 

The Ethics of Distribution 

The development of social life in the direction of altruism — The law 
of immaturity — Altruism originates in parental emotions — ^The 
law of maturity — ^Thc survival of the fittest — The penalties of 
inefficiency — ^The consequences of State interference with the 
survival of the fittest — The qualities and sentiments which con- 
stitute fitness in the social state — Monopoly fostering the sur- 
vival of the less fitted ; justice in distribution tending to raise the 
general degree of fitness — Distributive proposals of Socialism 
disastrous to society — Their defence examined : {a) that com- 
petition fails to secure a reward commensurate vnth services 
rendered ; (^) that special energy and ability, being the result of 
ancestral evolution, the '^ rent of ability " is a social inheritance ; 
(r) that the power of any individual to supply his wants in the 
social state depends upon the desire of others for his services ; 
{if) that society is the only heir to the social inheritance of 
intellect and discovery — The right to an equal opportunity for 
the acquisition of knowledge — Distinction between equal rights 
to the possession of things and equal rights to the opportunity for 
the production of things • . . . Pages 208-227 

CHAPTER VI 

The Right to the Use of the Earth 

The right to the use of the earth a natural right and equal for all — No 
generation can limit or abolish the equal rights of future genera- 
tions — ^Justice condemns private ownership of land, as interfering 
with the law of equal freedom — The denial of equal freedom 
through private ovimership of land originates and is maintained 
by force — The duty of the State to enforce regulations giving 
equal rights to land — The appropriation of rent for common 
purposes securing equal rights to land — ^An illustration 228-232 

CHAPTER VII 

The Ethics of Property 

The proprietary sentiment recognisable in animals — The causes ot 
its indefiniteness and limitation among savages — Its growth among 



XX DEMOCRACY VERSUS SOCIALISM 

pastoral and agricultural tribes — The origin and growth of slavery 
— The causes of its abolition — Communal use and ownership of 
land — The Teutonic mark — War originates private ownership of 
land — Its original limitations — Landowners, as the governing class, 
removing such limitations — Property in slaves, in land, and in 
monopolies resting on a different basis than property in labour- 
products — The ethics of property in labour-products — Property in 
land, slaves, and monopolies directly infringes upon the rights of 
property, and leads to indirect infringements — The failure of the 
State to make like claims upon property as upon lives for 
defensive war — Socialism would merely change the incidence of 
injustice with regard to property . . Pages 233-245 



i( 



CHAPTER VIII 

The Right of Free Industry 

The right to labour," what it is — Socialism, abolishing the natural 
right to work, would establish slavery — The essence of slavery — 
The line of ethical demarcation between free and unfree indus- 
tries — Objections considered : {a) Fraudulent promises and adult- 
erations ; (3) Factory legislation . . . 244-249 



CHAPTER IX 

Individualism 

Socialist conception of the prevalence and influence of Individualism 
— Social injustice arises not from prevailing Individualism, but 
from its legal limitation — All social evolution proceeds from 
primitive Socialism in the direction of Individualism — The ethical 
difference between Socialism and Individualism — Existing limita- 
tions of Individualism and their result — The persistence of evils 
arising from past interferences of the State with individual free- 
dom — Examples of such interferences in England — The degrada- 
tion of English labourers and remedial measures — Full Indi- 
vidualism consisting of the abolition of all interference with 
equal freedom alone can complete the elevation of the working 
classes ...... 250-260 



CONTENTS xxi 



PART IV 
THE OUTCOME OF SOCIALISM 

CHAPTER I 

The Unconscious Growth of Social Structures 

Social evolution, like all evolution, consists in the development, multi- 
plication, and increasing definiteness of structures — The variety, 
interdependence, and definiteness of the structures of co-operative 
societies — Individual desire to satisfy wants with least exertion, 
the originating cause of social structures — Their growth unpre- 
meditated ; not social, but individual wellbeing being the im- 
mediate object aimed at — Socialism involves the substitution of 
conscious creation for unconscious growth — The evolution, 
growth, and decline of social structures described — Socialism 
must reduce to a minimum the development of new and decline 
of old structures — Its influence on inventions and discoveries — 
The shrinkage of social structures under Socialism — Stagnation 
rapidly followed by retrogression, the result of Socialism 

Pages 263-276 

CHAPTER II 
The Unconscious Discharge of Social Functions 

Co-operation the condition of social life — The two kinds of co- 
operation : {a) aiming directly at common ends, and compulsory ; 
{l) aiming directly at individual ends, and voluntary — Their 
contrasts — Illustration : the provisioning of an army and of a great 
city — The limited scope of compulsory co-operation — Impossi- 
bility to consciously direct the major activities of social 
life ..... . 277-288 

CHAPTER III 

The Industrial Organisation of the Socialist State 

Compulsory regularion declines with mail's better adaptation to social 
life — Socialism, disregarding this law, increases compulsory regu- 



xxii DEMOCRACY VERSUS SOCIALISM 

lation — Socialist and military organisation compared — Socialist 
admissions — Compulsory allocation of occupation and location — 
The enforcement of " equality of service " — Slavery the neces- 
sary result of the conscientious discharge of its regulative func- 
tions by the socialised State . . • Pages 289-299 



CHAPTER IV 

The Political Outcome of Socialism 

The tendency of governmental structures to escape from popular 
control — The political machine in the United States — The 
experience of trade unions — Mr. and Mrs. Sidney Webb's 
statements — Differences between the regulative agency of trade 
unions and that of the socialised State — The bribing and terror- 
ising power of the latter — Its control of the Press — Impossibility 
of resistance to oppressive or corrupt use of power — Different 
systems of appointing and controlling regulative agency examined 
— Inevitability of such oppression and corruption — Evolution of 
caste system and hereditary despotism — The experience of the 
United States cited — Impossibility of strikes . 3CX>-3i6 

CHAPTER V 

The Industrial Oinx:oME of Socialism 

The motive for industrial exertion — Its weakness under existing con- 
ditions and total absence under Socialism — Invalidity of the 
socialist's reply to this contention — The inefficiency of the regu- 
lated labour equalled by the inefficiency of the regulators, and 
followed by a decline in the efficiency of the national capital — 
Gradual reduction in the productivity of national labour — Uni- 
formity in poverty the result . . . 317-326 

CHAPTER VI 

The Family under Socialism 

The evolution of parental emotions and their growth into generally 
altruistic sentiments — Monogynic relations best subserve this 



CONTENTS xxiii 

evolution and the wellbeing of offspring — Socialism must 
materially alter this relation — The early separation of parents 
and children weakening altruistic sentiments generally — Its influ- 
ence on the propagation of the race, and upon the character and 
permanency of the marital relation — These tendencies supported 
by the pecuniary independence of women and the absence of a 
separate family home — The influence of public training on the 
character of the children — Survival of the unfittest — Retrogression 
and decay the inevitable result — Socialist evidence confirming the 
facts adduced .... . Pages 327-336 



CHAPTER VII 

The Ethical Oinx:oME of Socialism 

The mental and physical adaptability of man to surrounding con- 
ditions — The reciprocal influence of individual character and 
social control — Appropriate sentiments accompanying various 
stages of social evolution — Socialism must develop appropriate 
sentiments and ideas in the members of the socialised State, viz. 
implicit obedience and submission to authority ; loss of the sense 
of justice ; untruthfulness, selfishness, and unchastity 337-342 



PART V 



THE SINGLE TAX 



CHAPTER I 

Introduction 

Private monopoly, especially land monopoly, the cause of social in- 
justice — Recapitulation of conclusions drawn in preceding chap- 
ters — Recapitulation of distinctions drawn between land and 
wealth, inclusive of capital . . . 345'34^ 



xxiv DEMOCRACY VERSUS SOCIALISM 



CHAPTER II 

Objections to Principles 

Lord Bramwcll's theory of labour -value in land — "The Fabian 
Society " : the compound nature of capital ; the impossibility of 
distinguishing between capital and land ; the ethical equality of 
rent and interest ; that capital may have been acquired unjustly, 
while land may have been purchased with rightfully acquired 
wealth — Mr. J. C. Spence, on behalf of **The Liberty and 
Property Defence League ** : that wealth is no more " made " by 
labour than land ; that all forms of wealth are limited in amount 
as land is limited ; that if land is common property, all men are 
part-proprietors of Canadian land, and none of it can be taken 
possession of without the special permission of all men — Mr. 
Lecky's version of this argument — that priority of claim is the 
basis of all property -rights ; that further corollaries from the 
theory of common property in land are : the prohibition of the 
use of any natural object involving its destruction ; the badness of 
all titles to private property ; the prohibition of the appropriation 
of anything — Professor Huxley: the non-existence of natural 
rights ; that equal right to land involves the denial of individual 
rights to wealth ; that individual property in land is a corollary of 
the derivation of individual rights of property from the exertion 
of labour. .... • Pages 349-371 

CHAPTER III 

The Method of Reform 

Equal right to the use of land involves as a corollary the duty of 
governments to frame and enforce regulations safeguarding this 
right — Where this right is being disregarded, the regulations must 
be framed in a manner which avoids unnecessary hardship being 
inflicted upon those who suffer from and those who benefit by this 
disregard — Other conditions to be observed — Nationalisation of 
land by purchase — It would miss the object aimed at and would 
produce secondary evils — Nationalisation of the rent of land by 
purchase produces similar results — Nationalisation of the land by 
sudden confiscation produces utmost hardship to owners and non- 
owners alike and produces secondary evils^ — Henry George's Single 



CONTENTS XXV 

Tax method alone complies with all the conditions — Its working 
and results — Its applicability to franchise-monopolies — The treat- 
ment of routes of transportation . . . Pages 372-384 



CHAPTER IV 

The Ethics of Compensation 

The demand for compensation by defenders of private ownership of 
land illogical — Lord Bramwell's and Mr. Lecky's formulation of 
the same — ^The demand for compensation by the upholders of 
equal rights to land considered — Its validity when Land Nationali- 
sation is the method of reform ; its invalidity when applied to the 
Single Tax method — The right to compensation involves the 
denial of equal rights to land and of individual rights to labour- 
products — Compensation would perpetuate the existing system in 
another form — ^The plea of constructive general sanction — ^The 
plea that land has been purchased with labour-products — ^The plea 
of disappointed expectation — ^The plea of destructive effect on the 
sanctity of property . . . . 385-395 

CHAPTER V 

The SupnciENCY of the Reform 

It abolishes speculation in land, lowers rent, increases demand for labour, 
and raises wages — It renders labourers independent of capitalist 
employers — ^The disappearance of involuntary unemployment — 
The disappearance of large fortunes — ^Wage-industry superseded 
by co-operative industry — Almost disappearance of a separate class 
of capitalists — The disappearance of restrictive legisladon — ^The 
dispersion of population and garden-homes — Improvement in the 
lot of women — ^The re-population of the country — Objections by 
socialists considered — Mr. H. M. Hyndman : rent an insignificant 
amount ; the relief of capitalists from taxation ; that wages fall 
/rfn' passu with the removal of taxation from wage-earners — Mr. 
J. A. Hobson : that other classes have partaken, even more than 
landowners, of the immense growth of wealth ; that the Single 
Tax system would fail unless adopted universally — The Fabian 
Essays: the destruction of opportunities for employment furnished 
by the wealthy classes .... 396-413 



xxvi DEMOCRACY VERSUS SOCIAUSM 



CHAPTER VI 

Mr. Edward Atkinson's Objections 

That the Single Tax falls on the actual producers of wealth — ^That it 
would prevent men of small means from using land — That 
it would throw all valuable land into the hands of great 
capitalists, and would not diminish their incomes — ^That the tax 
would be shifted to consumers, and that it could not be so shifted 
— ^That the tax would fall most heavily on farmers — ^That the poor 
will pay as much as the rich — ^That it is impossible to determine 
the '*site** value of land — ^That no one would make improve- 
ments unless the land were leased for long periods at a fixed 
rent ..... Pages 414-425 



CHAPTER VII 

Professor Francis A. Walker's Objections and Admissions 

Objections: That industrial crises are not due chiefly to speculative 
holding of land — That valuable land is not withheld from use — 
That the effect of improvements in methods of production does 
not generally increase rent in a stationary population and where 
all land is private property — Increase of agricultural wages in 
Great Britain — Increase of capitalists' profits — Increased produc- 
tion does not necessarily involve an increased demand for land, 
and the latter habitually falls short of the increased demand for 
labour — ^That improvements in transportation invariably reduce 
rent — That all improvements in agriculture invariably reduce 
rent — Admissions: That the landowner renders no service in 
return for the rent which he appropriates — ^That property in land 
differs materially from property in labour-products and occupies a 
lower ethical level — That increase in the value of land is due, not 
to the exertions and sacrifices of its owners, but to those of the 
community — Further Objections : That the admitted injustice in- 
volved in private ownership of land cannot be removed without 
giving rise to greater evils. These are : enormous addition to the 
power of governments, and exhaustive culture of the soil 426-45 1 



k 



CONTENTS xxvii 



CHAPTER VIII 

CoNnRMATION BY SOCIALISTS 

Extracts from the final chapter of Karl Marx's Capital^ Fabian Essays — 
Sidney Webb, in Socialism in England — August Bebel, in Woman — 
Sidney and Beatrice Webb, in Problems of Modern Industry — 
Edward Bellamy, in Equality . . • Pages 452-463 



APPENDICES 

1. The annual rental-value of land in the United Kingdom . 467 

2. Revenue derived from taxation in the United Kingdom . 468 

3. Annual rental-value of land and revenue derived from taxa- 

tion in the United States .... 468 

4. Annual rental-value of land and revenue derived from taxa- 

tion in the Colony of Victoria . . • 469 

5. Estimated contribution of capitalists to taxation in the 

United Kingdom . • • . . 469 

6. Estimated contribution of working population to taxation 

in the United Kingdom .... 470 

7. " The Rage for and Trend of Trusts," reprinted from The 

Public^ Chicago ..... 470 



INTRODUCTION 

The greatest optimist cannot r^ard with satisfaction the 
social conditions of the period through which we are 
passing. At no time could wealth be produced with so 
little effort ; at no time was wealth so abundant ; yet 
mankind has benefited but inadequately by this unequalled 
increase in the material means of happiness. 

The statistics of lunacy and suicide confirm the general 
conviction that the effort required to gain a livelihood is 
constantly becoming greater and the strain on the nervous 
energy of all workers more exhausting. Though a few 
amass fortunes as huge as they are usdess for the enjoy- 
ment of anything but irresponsible power, the great mass 
of the people, the bulk of the wealth-producers, are only 
a little better off than at the period of their greatest 
degradation ; while below them there is accumulating a 
mass of hopeless human wreckage which makes our great 
cities comparable to putrefying refuse heaps.^ Last, 
not least with this very advance in the facility of making 
wealth, the opportunity to do so has become more re- 
stricted and more uncertain for the working population. 
Apart from the ever-increasing mass of those who cannot 
find any employment, a much larger number are exposed 
to the evil of occasional unemployment ; and recurring 

^ **No one can contemplate the condition of the mastet of the people without 
desiring something like a revolution ibr the better.** — Giffen, Esuys in Finance^ 2nd 
aeries, p. 393. 

** It may well be the case, and there is every reason to fear it is the case, that there 
is collected a population in our great towns which equals in amount the whole of those 
who lived in England and Wales six centuries ago, but whose condition is more 
destitute, whose homes are more squalid, whose means are more uncertain, whose 
prospects are more hopeless than those of the poorest serfii of the Middle Ages and the 
meanest drudges of the mediaeval cities.*' — Rogers, Six Centuries of Work mid IVa^u 




XXX DEMOCRACY VERSUS SOCIALISM 

industrial crises, general and partial, hold up for ever 
before his eyes that worst terror of the decent, self-re- 
specting worker — more or less continued unemployment.^ 

Moreover, wealth is gradually concentrating ini fewer 
and fewer hands, a process which, if unchecked, must 
ultimately lead to the division of the population into two 
warring classes with no interest in common, a ruling 
plutocracy holding irresponsible power, and using it 
ruthlessly to oppress the people, confronted by a mass of 
hopeless proletarians for ever striving to shake off the 
yoke imposed upon them.* Long before this extreme is 
reached, however, social revolution, with all its horrors, will 
have put a temporary check upon this tendency. 

The problem which, with ever-increasing urgency, 
demands a solution at the hands of our society, if peace 
and progress are to be preserved, is that of the persistence 
of undeserved poverty in the midst of abundant wealth ; 
of unemployment in the midst of unsatisfied desires. 

^ **In a normal state of industry in machine-using countries there exists more 
machinery and more labour than can find employment, and only for a brief time in each 
decennial period can the whole productive power of modem machinery be fully used."— 
Hobson, The Eindution of Modern QfitaHsm^ p. 197. 

^ In The Arena of December 1896, page 86, Eltweed Pomeroy publishes a table 
showing the distribution of wealth in Great Britain among males of twenty-five years 
and over, based upon the statistics of death and death-duties for the years 1890-94. 
In explanation he states : — ** In my opinion it is an under-statement of the con- 
centration of wealth in Great Britain ; and yet the facts are startling. Over 56 per 
cent own nothing ; and if we add the three first classes together, we have nearly 80 per 
cent owning less than 3 per cent, and then a little over 20 per cent owning 97 per cent ; 
if we add the first four classes together, we have over 90 per cent of the people owning 
less than 8 per cent of the wealth of the country, and under 10 per cent owning 92 per 
cent ; and if we take the last two classes, we find that less than one-fiftieth of the 
people own over two-thirds of the wealth \ and then look at that last class of million- 
aires, numbering less than three one-hundredths of i per cent, and yet owning over 13 
per cent of the wealth." 

Dealing with the State of Massachusetts, he shows the distribution of wealth to 
have altered between the period 1829-31 and that of 1879-81 as follows, pp. 91, 92 : — 

** The class with nothing have increased from 62 to 69 per cent. The millionaires 
have increased from .002 per cent with 8} per cent of the wealth, to .08 per cent with 
24 per cent of the wealth. The number of small property owners with less than a 
(1000) thousand (dollars) have decreased from under 20 per cent to 9 per cent, and their 
property has decreased from a little over 4 per cent to just above i per cent. The 
rich men worth between $100,000 and $500,000 have increased from .009 per cent to 
.50 per cent, and their wealth has increased from nearly 13 per cent to 26 j per cent. 
The moderately well off, worth from $1000 to $5000, have remained nearly the same 
in per centage of population, around 13 per cent, but their wealth has decreased from 21 
per cent to 8 J per cent." 

George K.Holmes, of the United States census office, in tht Science SluarterlyyDtctmhtt 
1893, states : — ** Twenty per cent of the wealth of the United States is owned by three 
one-hundredths of i per cent of the population j 71 per cent is owned by 9 per cent of the 
fiimilies, and 29 per cent of the wealth is all that falls to 91 per cent of the population." 



INTRODUCTION xxxi 

Why is it that millions of men cannot get enough bread 
to eat, when two or three men can produce sufficient 
wheat to maintain a thousand men for a year ? Why is it 
that millions of human beings, in the most civilised 
countries, are shivering in insufficient clothing, though 
four of them can produce sufficient cotton or woollen cloth 
for one thousand of them ? Why are so many without 
decent boots, when a year's labour by one man can produce 
nearly 4CXX) pairs of boots ? Why is it that while a boot- 
maker wants bread, a tailor boots, and a baker clothes, 
all three, instead of supplying each other's wants, are 
compelled to want in enforced idleness ? 

These are questions which ought to present themselves 
to every thinking man, and which appeal with special 
urgency to the minds of the wage-earners. For the slight 
improvement in the condition of the majority of them, 
the higher wages and shorter hours or labour which 
organisation and legislation — especially legislation which 
abolished previous interference with equal freedom — ^have 
enabled them to exact, have given them leisure and 
strength to consider their social condition. State schools 
and dieap literature have given them access to the printed 
thoughts of their leaders. The concentration of industry 
in great cities has brought the additional stimulus of an 
easy interchange of thought. Political enfranchisement 
has endowed them with the hope that their aspirations 
of to-day may be the realised condition of the near 
future. 

Socialism offers a plausible answer to these questions ; 
appeals to the dissatisfied with an easily understood 
remedy for the social and industrial evils which offend his 
sense of justice. Its harmonious, if superficial, simplicity 
captivates the half-educated from whom it requires no 
mental exertion ; its passionate appeals to the highest 
principles of ethics and the feeling of human brotherhood 
intoxicate the emotional, while its pretended claims to 
scientific completeness and evolutionary succession have 
drawn within its ranks many men of marked ability, who 
have despaired of any other method for the removsJ from 
our civilisation of the evils which they abhor. 



xxxii DEMOCRACY VERSUS SOCIALISM 

It is therefore not astonishing that Socialism has 
made and is still making progress, though its progress 
may easily be over-rated.^ For great numbers of men 
are habitually classed or class themselves as socialists who 
in reality know little or nothing of its nature or have no 
sympathy with its proposals. Whoever seeks to improve 
social conditions, even if the methods which he proposes 
are fundamentally different from those of Socialism, is 
nevertheless regarded as a socialist by unthinking or 
prejudiced defenders of the existing system. On the 
other hand, large numbers of men, profoundly conscious of 
the injustice of existing social arrangements, lightly adopt 
the name of socialist, though they are ignorant of the 
real aims of the party which they thus apparently join. 
While the numerical growth of Socialism is thus over- 
estimated, it nevertheless is sufficiently great to demand 
the most earnest attention and consideration. 

What then is Socialism ? The great majority of the 
middle -class population, who derive their information 
mainly from the daily newspaper, regard it either as a 
revolutionary attempt at an equal division of wealth, or as a 
foolish aspiration for the sudden establishment of a Utopia. 
No doubt the speeches and writings of the earlier socialists 
have given ample excuse for these mistakes, and even now 
there are many socialist speakers and not a few writers 
whose violent utterances and extravagant dreams lend 
themselves to easy misunderstanding and misrepresenta- 
tion. Apart, however, from the consideration that such 
extravagances are inevitable in any movement which 
draws the mainspring of its activity from a manly revolt 
against direful injustice and from a noble compassion for 
the suffering which this injustice inflicts upon millions of 
human beings, it is manifestly unjust and mischievous to 
judge a great movement by its accessories instead of by 
its essentials, — unjust, because it amounts to misrepre- 

* 

1 ** Although Socialism involves State control. State control does not imply 
Socialism — at least in any modern meaning of the term. It is not so much to the 
thing which the State does as to the end for which it does it, that we must look before 
we can decide whether it is a socialist State or not. Socialism is the common holding 
of the means of production and exchange, and the holding of them for the equal benefit 
of all" — Fabian Essays, p. 212. 



INTRODUCTION xxxiii 

sentation; mischievous, because, while producing a false 
sense of security on one side, it exasperates the other. 

It is therefore deeply to be regretted that socialists 
have just cause to complain that this treatment is only too 
often meted out to them. 

Socialism has long since cast off its early revolutionary 
and Utopian swaddling-clothes, and has been transformed 
into a political system working in constitutional channels. 
Instead of depending upon a revolution for the realisation 
of its ideas, it looks to a gradual transformation of our 
society through the successive legalisation of small incre- 
ments of its teaching. Instead of counting upon the 
sudden creation of a Utopia, it looks upon society as 
an evolutionary organism, which, through the gradual 
adoption of socialistic proposals, is bringing its structure 
into harmony with its environment. Modern Socialism 
is, therefore, a particular view of the organisation required 
to bring society into harmony with its industrial expansion, 
and is based on certain historical, economic, ethical, 
industrial, and political conceptions. 

Nor must it be omitted to acknowledge here that, 
contrary to the crude opinion of " the man in the street," 
Socialism owes its development and progress to men of 
high ability, character, and attainments ; that its exponents 
have rendered important services in the development of 
economic science, especially from the historical stand- 

Eoint ; and that it inculcates a spirit of altruism and 
rotherhood among men which gives a high moral 
and educational value to much of its literature. The 
prevailing neglect of the social for the individual side of 
life, the glorification of wealth and luxury and other 
^m'darly regrettable tendencies of modern societies, have 
been and are being denounced by socialist teachers with 
enthusiastic devotion. If they mostly err in the opposite 
direction, if they, in their turn, disregard the valid claims 
of the individual in man and mistake compulsion for 
beneficence, it is only the inevitable backward swing of 
the pendulum before an equilibrium is reached. 

A definition of Socialism which shall alike exclude all 
those reformatory proposals which, while they bear a 



xxxiv DEMOCRACY VERSUS SOCIAUSM 

semblance to those of Socialism, yet spring from opposite 
motives, and will set in motion opposite tendencies, and 
which shall not fail to include all that Socialism posits, 
presents certain difficulties, because Socialism has not, on 
all points, arrived at a static condition. In many respects 
it is as yet in a state of development. Moreover, the 
difficulty is increased by the claims which many socialists 
advance, to count as evidence for the acceptance of their 
creed, political measures, which, though neither adopted in 
a socialistic spirit nor of a socialistic character, neverthe- 
less bear a certain semblance to socialistic proposals.^ 
Nevertheless, certain leading and essential characteristics 
are sufficiently developed to enable general limits to be 
drawn. In endeavouring to elucidate such a definition at 
the present stage of this inquiry, it is, however, necessary' 
to confine it to the absolutely essential, leaving minor 
characteristics for subsequent treatment. 

^ '^One of the most indefatigable and prolific members of the socialist party, in a 
widely circulated tract, has actually adduced the existence of hawkers' licences as an 
instance of the 'progress of Socialism."* — Hubert Bland, in Fabian Essay s, p. 212. 



PART I 



AN ANALYSIS OF SOCIALISM 




CHAPTER I 

THE ECONOMIC CONCEPTIONS 

The fundamental economic conceptions of Socialism arise 
from Karl Marx's theories of value and surplus value, and 
culminate in the conception that the income of landowners, 
capitalists, and employers alike, with the sole exception of 
some reward due to the employer as organiser and director 
of industry, are deductions from the wages of individual 
labourers, a tribute imposed upon labour. 

The following extracts from Marx's great work Capital 
give the substance of these theories : — 

"That which determines the magnitude of the value 
of any article is the amount of labour socially necessary, 
or the labour-time socially necessary, for its production. 
Each individual commodity in this connection is to be con- 
sidered as an average sample of its class. Commodities, 
therefore, in which equal quantities of labour are embodied, 
or which can be produced in the same time, have the same 
value. The value of one commodity is to the value of any 
other, as the labour-time necessary for the production of 
the one is to that necessary for the production of the other. 
As values all commodities are only definite masses of con- 
gealed labour-time " (p. 6).^ 

" The value of labour-power is determined, as in every 
other commodity, by the labour- time necessary for the 
production, and consequently also for the reproduction, of 
this special article. So far as it has value it represents 

^ This and tubtequent quotations from Capital are taken from the stereotyped edition. 
Swan Sonncnschein and Co. London, 1889. 



4 DEMOCRACY VERSUS SOCIAUSM part i 

no more than a definite quantity of the average labour of 
society incorporated in it. Labour-power consists only as 
a capacity or power of the living individual. Its produc- 
tion consequently presupposes his existence. Given the 
individual, the production of labour-power consists in his 
reproduction of himself or his maintenance. For his main- 
tenance he requires a given quantity of the means of sub- 
sistence. Therefore the labour -time requisite for the 
production of labour-power reduces itself to that neces- 
sary for the production of these means of subsistence ; in 
other words, the value of labour-power is the value of the 
means of subsistence necessary for the maintenance of the 
labourer" (p. 149). 

" The value of a day's labour-power amounts to three 
shillings, because on our assumption half a day's labour is 
embodied in that quantity of labour-power, i.e. because the 
means of subsistence that are daily required for the produc- 
tion of labour-power cost half a day's labour. But the past 
labour that is embodied in the labour-power, and the living 
labour that it can call into action, the daily cost of m^n- 
taining it, and its daily expenditure in work, are two totally 
different things. The former determines the exchange- 
value {i.e. wages) of the labour-power, the latter is its use- 
value. The fact that half a day's labour is necessary to 
keep the labourer alive during twenty-four hours does not 
in any way prevent him from working a whole day. 
Therefore the value of labour- power and the value which 
that labour-power creates in the labour process are two 
entirely different magnitudes, and this difference of the two 
values was what the capitalist had in view when he was 
purchasing the labour-power" (p. 174). 

" The action of labour-power, therefore, not only repro- 
duces its own value, but produces value over and above it. 
This surplus-value is the difference between the value of 
the product and the value of the elements consumed in the 
formation of the product ; in other words, of the means ot 
production {i.e. material and fractional parts of * fixed 
capital') and the labour-power. . . . The means of pro- 
duction on the one hand, labour-power on the other, are 
merely the different modes of existence which the value of 



CHAP. 1 THE ECONOMIC CONCEPTIONS 5 

the original capital assumed when from being money it 
was transformed into the various factors of the labour- 
process. That part of capital which is represented by the 
means of production, by the raw material, auxiliary material, 
and the instruments of labour, does not in the process of 
production undergo any quantitative alteration of value. 
. . . On the other hand, that part of capital represented 
by labour-power does in the process of production undergo 
an alteration of value. It produces the equivalent of its 
own value and also produces an excess, a surplus-value, 
which may itself vary, may be more or less according to 
circumstances" (pp. 191, 192). 

*' If we now compare the two processes of producing 
value and of creating surplus-value, we see that the latter 
is nothing but a continuation of the former beyond a 
definite point. If, on the one hand, the process be not 
carried beyond the point where the value paid by the 
capitalist for the labour-power is replaced by an exact 
equivalent, it is simply a process of producing value ; if, 
on the other hand, it be continued beyond that point, 
it becomes a process of creating surplus - value " (pp. 
176, 177). 

" Capital has not invented surplus-labour. Wherever 
a part of society possesses the monopoly of the means of 
production, the labourer, free or not free, must add to the 
working time necessary for his own maintenance an extra 
working time in order to produce the means of subsistence 
for the owners of the means of production, whether this 
proprietor be the Athenian /caT^^ Karfa06<;, Etruscan theocrat, 
civis Romanus, Norman baron, American slave -owner, 
Wallachian boyard, modern landlord or capitalist" (p. 218). 

That this same idea of the unjust nature of surplus- 
value is entertained, though in slightly altered form, by 
the latest exponents of Socialism, in spite of the fact, which 
will be proved later on, that some of them repudiate the 
foundation on which the Marxian theory is built, — the 
labour-theory of value, — ^will be seen from the following 
quotation, taken from "Tract No. 69," issued by the 
Fabian Society, and written by Mr. Sidney Webb, The 
Difficulties of Individualism (p. 7) : — 



6 DEMOCRACY VERSUS SOCIALISM part i 

" When it suits any person having the use of land and 
capital to employ the worker, this is only done on con- 
dition that two important deductions, rent and interest, 
can be made from his product, for the benefit of two, in 
this capacity, absolutely unproductive classes — those ex- 
ercising the bare ownership of land and capital. The 
reward of labour being thus reduced, on an average by 
about one -third, the remaining eightpence out of the 
shilling is then shared between the various classes who 
have co-operated in the production." 

Occupying a place in the economic teaching of Socialism 
similar to that of surplus -value, is that of the evil of 
industrial competition. Industrial competition, it asserts, 
springs from and is inseparable from private ownership 
and management of land and capital, and the only possible 
method of putting an end to industrial competition and to 
the evils which it generates, is to abolish such private 
ownership and management. 

Two lines of reasoning are put forward in support of 
the maleficent influence of competition. The first of 
these is based on the limitation of competition. Owing, 
it states, to the inevitable tendency of modern machine 
production towards the concentration of industry in the 
hands of a comparatively small number of powerful in- 
dividual capitalists, or associations of capitalists, competi- 
tion has become one-sided. These capitalists instead of 
competing with each other, form monopolistic combina- 
tions to exclude competition between themselves. The 
inevitable trend of industrial progress is towards the 
extension of such monopolies until they must include 
every considerable industry in which machinery is largely 
employed. 

While, however, the capitalist is thus enabled to shelter 
himself from the evil results of competition, the wage- 
earners remain exposed to all its horrors. The only 
remedy for this one-sided competition is the total aboli- 
tion of industrial competition. 

Some examples of this line of reasoning will be found 
in the following quotations. The first is from the Bible 
of Modern "Scientific" Socialism, Karl Marx's Capital^ 



CHAP. I THE ECONOMIC CONCEPTIONS 7 

pp. 788, 789 : "That which is now to be expropriated 
is no longer the labourer working for himself, but the 
capitalist exploiting many labourers. This expropriation 
is accomplished by the action of the immanent laws of 
capitalistic production itself, by the centralisation of 
capital One capitalist always kills many. . . . Along 
with the constantly diminishing number of the magnates 
of capital, who usurp and monopolise all advantages of 
this process of transformation, grows the mass of misery, 
oppression, slavery, degradation, exploitation. . . . The 
monopoly of capital becomes a fetter upon the mode of 
production, which has sprung up and flourished along 
with it, and under it." 

The following is an extract from Fabian Essays in 
Socialism^ the oflicial publication of the Fabian Society, 
London.^ It states, pp. 89, 90 : — 

" I now come to treat of the latest forms of capitalism, 
the *ring' and the * trust' whereby capitalism cancels 
its own principles, and, as a seller, replaces competition by 
combination. When capitalism buys labour as a com- 
modity it effects the purchase on the competitive prin- 
ciple. . . . But when it turns round to face the public as 
a seller, it casts the maxims of competition to the winds 
and presents itself as a solid combination. Competition, 
necessary at the outset, is found ultimately, if unchecked, 
to be wasteful and ruinous. . . . 

" No doubt the ' consumer ' has greatly benefited by 
the increase in production and the fall in prices ; but 
where is * free competition ' now i Almost the only per- 
sons still competing freely are the small shopkeepers, 
trembling on the verge of insolvency, and the working 
men competing with one another for permission to live 
by work." 

The next quotation is taken from John A. Hobson's 
The Evolution of Modern Capitalism^ p. 357, a work which 
is conceived and executed in a spirit of patient research 
and careful analysis, which might serve as an example to 
many opponents of Socialism. 

^ F^lan Essays in Socialism if a complete exposition of modern English Socialism in 
its latest and most mature phase (Sidney Webb, Socialism in England^ p. 38). 



8 DEMOCRACY VERSUS SOCIALISM part 

" Since the general tendency of industry, so far as it 
falls under modern economics of machinery and method, 
is either towards wasteful competition or towards mon- 
opoly, it is to be expected that there wiU be a continual 
expansion of State interference and State undertaidngs. 
This growing socialisation of industries must be regarded 
as the natural adjustment of society to the new conditions 
of machine production." 

In addition, it may not be without interest to quote 
from the best-known and most widely-circulated work of 
an American socialist, Laurence Gronlund's The Co- 
operative Commonwealth. Though Gronlund is repudiated 
by more modern socialists as fevouring the catastrophic 
realisation of their doctrines, they do not materially differ 
from him as far as the doctrines themselves are concerned, 
and his book is still widely disseminated by socialist 
organisations. On pp. 42, 43, and 50, he states : — 

" The great weapon at the command cf the capitalist 
is competition. ... It deserves the name of cut- throat 
competition when the wage -workers are forced into a 
struggle to see who shall live and who shall starve. . . . 
But these are by no means the only sufferers. The small 
employers, the small merchants, are jus: as much victims 
of that cruel kind of competition as the wage- workers. . . . 

"But our big capitalists have a still more powerful 
sledge-hammer than that of competition ready at hand — 
to wit, combination. . . . They have already found that, 
while competition is a very excellent weapon to use 
against their weaker rivals, combination pays far better in 
relation to their peers." 

While the preceding authorities assert the failure of 
competition to remain free and equal under the conditions 
of modern industry, and base the proposals of Socialism 
on this failure, other authorities base them on the evil of 
competition qua competition. They disregard the argu- 
ments which arise from one-sided competition and boldly 
declare industrial competition jis such to be the cause of 
the exploitation and degradation of labour and incompat- 
ible with the moral and physical weUbeing of the people. 

Thomas Kirkup, one of the most careful and con- 



CHAP. I THE ECONOMIC CONCEPTIONS 9 

servative of socialist authors, declares in An Inquiry into 
Socialism^ p. 94 : — 

" So long and so far as the present competitive system 
prevails, it must tend to the degradation of the workers, 
to social insecurity, and disaster." 

W. D. P. Bliss, a well-known American statistician 
and writer on economic and industrial subjects, states in 
jl Handbook of Socialism^ pp. 18, 20, and 21: — 

"Individual competition of manufacturers and em- 
ployers compels them to produce as cheaply as possible 
in order to sell as cheaply as possible. If they do not 
they must go out of business ; for, under free competi- 
tion, he who sells a given article the cheapest will get the 
trade. Therefore, the manufacturer and producer, com- 
pelled to buy in the cheapest market, strive among other 
things to buy labour as cheaply as possible. The labourer, 
meanwhile, having no good land and no adequate capital, 
is compelled to sell his labour-force at the best price he 
can. But since men multiply rapidly while land and 
capital are limited, and since machinery and invention con- 
stantly enable fewer and fewer men to do work formerly 
done by many, there soon comes to be competition of 
two (or two thousand) men to get the same job. Now 
the employer we have seen to be compelled to employ 
those who will work cheapest. There thus comes to be 
a competition between workmen to see who will work 
cheapest, and so get the job. This goes on developing 
till wages fall to just that which will support and renew 
the lowest form of life, that will turn out the requisite 
grade of work. 

" Profit sharing, trades unions, partial co-operation, 
model tenements, charities, may do a little temporary good, 
but are mere bubbles on the ocean of competition ; the 
only way is to slowly replace competition by universal 
co-operation, which is Socialism. 

" Nor would Socialism limit all competition. Com- 
petition is not its devil. It recognises good as well as 
evil in competition. It would simply abolish industrial 
competition." 

The Guild of St. Matthew's is an association of socialist 



lo DEMOCRACY VERSUS SOCIALISM parti 

clerics of the Church of England. In a Memorial ad- 
dressed to the Pan-Anglican Conference^ by the Guild, 
the following statements occur : — 

"Our present social system — if the words * social 
system ' can be used for that which is largely the outcome 
of anarchic competition — is cruel and dishonest, and 
needs drastic reform and radical reorganisation. . . . The 
socialist objects to the competitive commercial system 
under which we live, that it robs the poor because he is 
poor," etc. 

While the two lines of reasoning here exhibited differ 
materially one from the other, they are not mutually 
exclusive. The socialist who objects to private monopoly 
may, and does, equally object to the freest and most 
untrammelled industrial competition. This is actually 
the state of mind prevailing among socialists who other- 
wise may widely differ from each other. The mono- 
polistic argument is used mainly against the theory that 
free competition by itself will cure the evils which beset 
our industrial system, in order to show that such free 
competition is itself disappearing; while the argument 
against competition as such is the one mainly relied upon 
to justify the novel industrial proposals of Socialism. The 
economic theory of Socialism with regard to competition, 
therefore, is that of the destructive and disintegrating 
influence of industrial competition as such. The main 
difference between Socialism and other non - socialistic 
methods of social reform will be found to be that, while 
the former condemns competition as such, the latter con- 
demn the one-sided and inequitable conditions under 
which competition is now carried on, and look forward 
to the removal of these unjust conditions and to the 
establishment of a really free and equal system of com- 
petition — the possibility of which Socialism denies — as 
the cure for the fundamental injustice of modern 
societies. 

These two conceptions, that of the destructive influ- 
ence of industrial competition qua competition, and that 

^ Report of Pan 'Anglican Cmfirence, London, 1888; Society for Promoting 
Christian Knowledge. 



CHAP. I THE ECONOMIC CONCEPTIONS 1 1 

interest and rent and profit or surplus -value are deduc- 
tions from the product, and, therefore, from the legiti- 
mate reward of the producers, form the bases of the 
industrial proposals of Socialism. The latter are devised 
for the purpose of abolishing industrial competition, and 
the exaction of rent, and interest, and profit, or surplus- 
value as the only measures which can secure to labour its 
full and just reward. 



CHAPTER II 



THE INDUSTRIAL PROPOSALS 



Socialists as well as their opponents have, almost exclu- 
sively, sought to define Socialism in terms of its industrial 
proposals. As a consequence, these proposals have been 
set out more frequently, and have been framed in more 
definite terms than is the case with socialist principles 
generally. Nevertheless, there is no complete agreement 
between the authorities, even on this, the central point of 
Socialism, though the differences, as will be seen, are not 
of suflicient importance to prevent a definite conclusion 
being arrived at. 

The Social Democratic party of Germany is the most 
numerous and influential body of socialists. Their 
enunciation of the principles and aspirations which ani- 
mate them is, therefore, of suflicient importance to justify 
the republication here, in full, of that part of their latest 
platform which deals with general principles. It was 
framed at the Convention of the party, which took place 
at Erfurt in October 1891, and is known as The Erfurt 
Programme. 

" The economic development of industrial society 
tends inevitably to the ruin of small industries, which 
are based on the workman's private ownership of the 
means of production. It separates him from these means 
of production, and converts him into a destitute member 
of the proletariat, whilst a comparatively small number of 
capitalists and great landowners obtain a monopoly of the 
means of production. 

" Hand in hand with this growing monopoly goes the 



CHAP. II THE INDUSTRIAL PROPOSALS 13 

crushing out of existence of these shattered small industries 
by industries of colossal growth, the development of the 
tool into the machine, and a gigantic increase in the 
productiveness of human labour. But all the advantages 
of this revolution are monopolised by the capitalists and 
great landowners. To the proletariat and to the rapidly 
sinking middle classes, the small tradesmen of the towns, 
and the peasant proprietors (Bauern), it brings an in- 
creasing uncertainty of existence, increasing misery, 
oppression, servitude, degradation, and exploitation. 

" Ever greater grows the mass of the proletariat, ever 
vaster the army of the unemployed, ever sharper the 
contrast between oppressors and oppressed, ever fiercer the 
war of classes between bourgeoisie and proletariat which 
divides modern society into two hostile camps and is the 
common characteristic of every industrial country. The 
gulf between the propertied classes and the destitute is 
widened by the crises arising from capitalist production, 
which becomes daily more comprehensive and omnipotent, 
which makes universal uncertainty the normal condition 
of society, and which furnishes a proof that the forces of 
production have outgrown the existing social order, and 
that private ownership of the means of production has 
become incompatible with their full development and their 
proper application. 

*' Private ownership of the means of production, 
formerly the means of securing his product to the pro- 
ducer, has now become the means of expropriating the 
peasant proprietors, the artisans, and the small tradesmen, 
and placing the non-producers, the capitalists and large 
landowners in possession of the products of labour. 
Nothing but the conversion of capitalist private ownership 
of the means of production — the earth and its fruits, 
mines and quarries, raw material, tools, machines, means 
of exchange — into social ownership, and the substitution 
of socialist production, carried on by and for society, in 
the place of the present production of commodities for 
exchange, can effect such a revolution, that, instead of 
large industries and the steadily growing capacities of 
common production being as hitherto a source of misery 



14 DEMOCRACY VERSUS SOCIALISM parti 

and oppression to the classes whom they have despoiled, 
they may become a source of the highest wellbeing and of 
the most perfect and comprehensive harmony. 

" This social revolution involves the emancipation, not 
merely of the proletariat but of the whole human race, 
which is suffering under existing conditions. But this 
emancipation can be achieved by the working class alone, 
because all other classes, in spite of their mutual strife 
of interests, take their stand upon the .principle of 
private ownership of the means of production, and have 
a common interest in maintaining the existing social 
order. 

" The struggle of the working classes against capitalist 
exploitation must of necessity be a political struggle. The 
working classes can neither carry on their economic struggle 
nor carry on their economic organisation without political 
rights. They cannot effect the transfer of the means of 
production to the community without being first invested 
with political power. 

" It must be the aim of social democracy to give 
conscious unanimity to this struggle of the working 
classes, and to indicate the inevitable goal. 

" The interests of the working classes are identical in 
all lands governed by capitalist methods of production. 
The extension of the world's commerce and production 
for the world's markets make the position of the workman 
in any country daily more dependent upon that of the 
workman in other countries. Therefore, the emancipa- 
tion of labour is a task in which the workmen of all 
civilised lands have a share. Recognising this, the Social 
Democrats of Germany feel and declare themselves at one 
with the workmen of every land, who are conscious of the 
destinies of their class. 

" The German Social Democrats are not, therefore, 
fighting for new class privileges and rights, but for the 
abolition of class government, and even of classes them- 
selves, and for universal equality in rights and duties, 
without distinction of sex or rank. Holding these views, 
they are not merely fighting against the exploitation and 
oppression of the wage-earners in the existing social order, 



CHAP. II THE INDUSTRIAL PROPOSALS 15 

but against every kind of exploitation and oppression, 
whether directed against class, party, sex, or race." ^ 

It is not without interest, to compare with the Erfurt 
Programme that issued by the Social Democratic party of 
Germany at their previous Convention at Gotha in 1875, — 
The Gotha Programme. The extract from the same, 
here republished, deals with both the industrial and dis- 
tributive proposals. It will be seen that the latter is 
formulated in definite terms, while the Erfurt Pro- 
gramme^ though of later date, is judiciously silent with 
regard to it : — 

** Labour is the source of all wealth and of all culture, 
and, as useful work in general is possible only through 
society, so to society — that is to all its members — belongs 
the entire product of labour by an equal right, to each one 
according to his reasonable wants, all being bound to work. 

" In the existing society the instruments of labour are 
a monopoly of the capitalist class ; the subjection of the 
working class thus arising is the cause of misery and servi- 
tude in every land. 

" The emancipation of the working class demands the 
transformation of the instruments of labour into the 
common property of society and the co-operative control 
of the total labour, with the application of the product of 
labour to the common good, and just distribution of the 



same." 



The Social Democratic Federation (England) states its 
objects to be : — 

" The socialisation of the means of production, distri- 
bution and exchange, to be controlled by a democratic 
state in the interests of the entire community, and the 
complete emancipation of labour from the domination of 
capitalism and landlordism, with the establishment of social 
and economic equality between the sexes." 

The following extract is taken from the Manifesto 
issued by the Joint Committee of Socialist Associations in 
England. As a united expression of the principles and 
aims of socialists it has therefore authoritative value : — 

" There is a growing feeling at the present time that, 

^ Profettor Ely's translation. Socialism, 



1 6 DEMOCRACY VERSUS SOCIALISM parti 

in view of the increasing number of socialists in Great 
Britain, an effort should be made to show that, whatever 
differences may have arisen between them in the past, all 
who can fairly be called socialists are agreed in their main 
principles of thought and action. . . . 

" On this point all socialists agree. Our aim, one and 
ail, is to obtain for the whole community complete owner- 
ship and control of the means of transport, the means of 
manufacture, the mines and the land. Thus we look to 
put an end for ever to the wage-system, to sweep away all 
distinctions of class, and eventually to establish national 
and international communism on a sound basis." 

The Chicago Convention (1889) ^^ "The Socialist 
Labour Party of the United States " issued a programme 
containing the following expression of its aims : — 

" With the founders of this republic we hold that the 
true theory of politics is that the machinery of government 
must be owned and controlled by the whole people ; but 
in the light of our industrial development we hold, further- 
more, that the true theory of economics is that the 
machinery of production must likewise belong to the 
people in common." 

While the Chicago Convention, being mainly repre- 
sentative of foreign socialists in the United States, cannot 
claim to speak for native American socialists, it is differ- 
ent with the recently organised "Social Democracy of 
America." This association, organised by and for 
Americans, and which, six months after its inception, 
claimed to already exceed in membership all other socialist 
bodies in the United States, has formulated its industrial 
proposals as follows : — 

" To conquer capitalism by making use of our political 
liberty and by taking possession of the public power, so 
that we may put an end to the present barbarous struggle, 
by the abolition of capitalism, the restoration of the land, 
and of all the means of production, transportation, and 
distribution, to the people as a collective body, and the 
substitution of the co-operative commonwealth for the 
present state of planless production, industrial war, and 
social disorder. . . . The social democracy of America 



CHAP. II THE INDUSTRIAL PROPOSALS 17 

will make democracy * the rule of the people ' a][truth by 
ending the economic subjugation of the overwhelmingly 
great majority of the people." 

The socialists of France are split up into many parties, 
differing mainly with regard to the methods — more or less 
revolutionary — by which their objects are to be attained. 
There does not, however, seem to exist any difference 
between them regarding their industrial object, which, as 
far as can be ascertained, is identical with that of their 
strongest body, the " Parti Ouvrier Socialiste Revolu- 
tionnaire Frangais." The programme of the latter contains 
the following declaration : — 

** To place the producer in possession of all the means 
of production — ^land, manufactures, ships, banks, credit, 
etc., and, as it is impossible to divide these things among 
individuals, they must be held collectively." 

In addition to these, the most authoritative declara- 
tions, because emanating from organised Socialism, some 
definitions of like character, supplied by prominent 
socialists and by one of their most eminent opponents, may 
also be cited. 

The first of these is the definition supplied by Dr* 
A. von Schaeffle. Though Dr. Schaeffle is a State 
socialist, and as such an opponent of organised Socialism, 
his definition has been received with almost general 
approval by socialists as well as others. The final part of 
the definition, which deals with distribution, must however 
be accepted with caution, inasmuch as it will be shown 
presently to be incorrect, and that the error has since 
been recognised by Dr. Schaeffle himself : — 

" To replace the system of private capital (i.e. the 
speculative method of production, regulated on behalf of 
society only by the free competition of private enterprises) 
by a system of collective capital — that is, by a method of 
production which would introduce a unified (social or 
* collective ') organisation of national labour, on the basis of 
collective or common ownership of the means of production 
by all the members of the society. 

" This collective method of production would remove 
the present competitive system, by placing under official 



1 8 DEMOCRACY VERSUS SOCIALISM parti 

administration such departments of production as can be 
managed collectively (socially or co-operatively) as well as 
the distribution among all of the common produce of all, 
according to the amount and social utility of the productive 
labour of each." ^ 

The two following definitions are taken from leading 
socialist writers : — 

W. D. P. Bliss — "Socialism is the fixed principle 
capable of infinite and changing variety of form, and only 
gradually to be applied, according to which the community 
should own land and capital collectively and operate them 
co-operatively for the equitable good of all." ^ 

William Clarke — '* A socialist is one who believes that 
the necessary instruments of production should be held 
and organised by the community instead of by individuals, 
within or outside of the community." * 

In spite of the variety of expressions used, it will be 
manifest that all the preceding declarations concur in 
describing the industrial proposals of Socialism to be : — 
The transfer to the community of both the ownership and 
management of all the land, and the means of production, 
without any exception whatsoever. Schaeflle alone makes 
a limitation, which, however, is meaningless, viz. — "as 
can be managed collectively." For it is obvious that 
every department of production can be managed collect- 
ively, when the question of relative advantage or conse- 
quences is left out of account, as is done by Schaeflle. 
Even a critic whose sympathies are largely on the side of 
Socialism — Professor R. T. Ely — makes the following 
comment on this part of Schaeflle's definition : — " Perhaps 
it is defective in the statement that Socialism proposes to 
place under oflicial administration such departments of 
production as can be managed collectively, without stating 
directly that Socialism maintains the possibility of a col- 
lective management substantially of all production."* 
Moreover, in so far as the preceding declarations form 
part of the programmes of organised Socialism, they 
possess authority exceeding that of minor socialist bodies, 

* The S^uintessence of Socialiartj p. 3. - j4 Handbook of Socialism, p. 9. 

' Political Science Quarter l^, December 1888. ^ Socialism, p. 20. 



CHAP. II THE INDUSTRIAL PROPOSALS 19 

or of individual authors, however eminent, and whether 
they are socialists or not. Nevertheless, in order to 
obtain a full grasp of this question, it is necessary to 
consider also declarations and definitions which, in one 
way or another, seem to place limits upon the state- 
ownership and management of industries demanded by 
Socialism. 

The most important of these is the prospectus of the 
Fabian Society of Socialists — an association which counts 
among its members not only the most cultured of English 
socialists, but many men and women whose character, 
abilities, and attainments have secured for them distin- 
guished positions in the world of literature, science, 
politics, and commerce : — 

" The Fabian Society consists of socialists. It there- 
fore aims at the reorganisation of society by the emanci- 
pation of land and industrial capital from individual and 
class ownership, and the vesting of them in the community 
for the general benefit. In this way only can the natural 
and acquired advantages of the country be equitably 
shared by the whole people. The Society accordingly 
works for the extinction of private property in land, and 
of the consequent individual appropriation, in the form 
of rent, of the price paid for permission to use the earth, 
as well as for the advantages of superior soils and sites. 

" The Society, further, works for the transfer to the 
community of the administration of such industrial capital 
as can conveniently be managed socially. For, owing to 
the monopoly of the means of production in the past, 
industrial inventions, and the transformation of surplus 
income into capital, have mainly enriched the proprietary 
class, the worker being now dependent on that class for 
leave to earn a living. 

" If these measures be carried out without compensa- 
tion (though not without such relief to expropriated 
individuals as may seem fit to the community), rent and 
interest will be added to the reward of labour, the idle 
class now living on the labour of others will necessarily 
disappear, and practical equality of opportunity will be 
maint^ned by the spontaneous action of economic forces 



20 DEMOCRACY VERSUS SOCIALISM part i 

with much less interference with personal liberty than the 
present system entails. 

" For the attainment of these ends the Fabian Society 
looks to the spread of socialist opinions, and the social 
and political changes consequent thereon. It seeks to 
promote these by the general dissemination of knowledge 
as to the relation between the individual and society in its 
economic, ethical, and political aspects." ^ 

The limitation here insisted upon — "such industrial 
capital as can conveniently be managed socially " — is an 
advance, though a slight one, upon Schaeffle, and by no 
means definite. It receives, however, a further extension 
at the hands of Mr. Sidney Webb, a prominent member 
of the Fabian Society, in the following definition : — 

" On the economic side. Socialism implies the collective 
administration of rent and interest, leaving to the indi- 
vidual only the wages of his labour, of hand or brain. 
On the political side it involves the collective control 
over, and ultimate administration of, all the main instru- 
ments of wealth production. On the ethical side it 
expresses the real recognition of fraternity, the universal 
obligation of personal service, and the subordination of 
individual ends to the common good." ^ 

The definition here given — " the main instruments of 
wealth production " — is decidedly more definite than that 
supplied by the prospectus of the Fabian Society, but still 
errs on the side of ambiguity. Its meaning, however, is 
explained by another member of the Fabian Society — Mr. 
Graham Wallas — in an official publication, Fabian Essays 
on Socialism. He defines it as " all those forms of pro- 
duction, distribution, and consumption which can con- 
veniently be carried on by associations larger than the 
family group." As Mr. Wallas's definition is valuable 
on other accounts as well, it is cited here in extenso : — 

" There would remain, therefore, to be owned by the 
community the land in the widest sense of the word, and 
the materials of those forms of production, distribution, 
and consumption which can conveniently be carried on by 
associations larger than the family group. . . . 

^ Sidney Webb, SocialitM in England, pp. 12, 13. ^ Socialism in England, p. 10. 



CHAP. II THE INDUSTRIAL PROPOSALS 21 

"The postal and railway systems, and probably the 
materials of some of the larger industries, would be owned 
by the English nation until that distant date when they 
might pass to the united states of the British Empire or 
the Federal Republic of Europe. Land is perhaps gener- 
ally better held by smaller social units. ... At the same 
time, those forms of natural wealth which are the neces- 
sities of the whole nation and the monopolies of certain 
districts — mines for instance, or harbours, or sources of 
water-supply — must be ' nationalised.' . . . 

" The savings of individuals would consist partly ot 
consumable commodities, or of the means of such industry 
as had not been socialised, and partly of deferred pay for 
services rendered to the community, such pay taking the 
form of a pension due at a certain age, or of a sum of 
commodities or money payable on demand." ^ 

While Mr. Wallas's explanation leaves little to be 
desired in the way of definiteness, it, on the other hand, 
shows that the limitation advocated by the Fabian Society 
is a verbal one only. For the industrial activities which 
cannot be " conveniently carried on by associations larger 
than the family group " are few and insignificant. The 
industry of sewing new buttons to an old shirt may 
conceivably fall under this head ; but the mending of the 
family socks, washing the family linen, and cooking the 
family dinner may easily be held to fall within this de- 
finition, and many socialists regard them as peculiarly 
the object of State management.* In any case all pro- 
duction, the produce of which exceeds the requirements of 
the producing family, i.e. all production for exchange, is 
manifestly covered by this definition. 

Moreover, the Fabian Society has itself repented of 
the slight limitation introduced in its prospectus. For at 
a subsequent date to that on which this document was 
issued, it became one of the signatories to the Manifesto 
issued by the Joint-Committee of Socialist Associations,* and 
which declares : " On this point all socialists agree. Our 
aim, one and all, is to obtain for the whole community 

^ Fab'um Essay s^ p. 135. 
' Vide Looking Backwcrds^ etc. ' Ante, P* '5* 



22 DEMOCRACY VERSUS SOCIALISM part i 

complete ownership and control of the means of transport, 
the means of manufacture, the mines, and the land." 

Similarly, Mr. Sidney Webb has in a later work, Pro- 
blems of Modem Industry ^ abandoned the slight limitation 
on collective ownership and control previously introduced 
by him, as the following quotation shows : — 

" We are trying to satisfy the ordinary man . . . that 
the main principle of reform must be the substitution of 
collective ownership and control for individual private 
property in the means of production."^ 

On all these grounds the conclusion is inevitable, that 
there is no appreciable difference between the aim of the 
Fabian Society and that of other socialist associations in 
the direction of State ownership and management, and that 
these comprise the land and every form of capital. Further 
inquiry will prove that any limitation of this programme 
is incompatible with the method of distribution which the 
Fabian Society or any other socialist body aims at, as also 
with that " abolition of industrial competition " to which 
all socialists are pledged. 

Moreover, the continuance of any private industry for 
exchange, however insignificant the volume of its products 
may be, is incompatible with the abolition of "Private 
Interest," which, as has been shown, is one of the fore- 
most objects of Socialism. The following quotation proves 
that socialists, even Fabian socialists, fully admit this 
fact : — 

" To whatever extent private property is permitted, to 
that same extent the private taking of rent and interest 
must be also permitted. If you allow a selfish man to 
own a picture by Raphael, he will lock it up in his own 
room unless you let him charge something for the privilege 
of looking at it. Such a charge is at once interest. If 
we wish all Raphael's pictures to be fully accessible to 
every one, we must prevent men not only from exhibiting 
them for payment, but from owning them."^ 

Whether the charge dealt with in the foregoing quota- 
tion is rightly described as interest or not, it is clear that 

^ S. and B. Webb, Prcblems of Modern Industry, p. 259 (1898). 

^ Fabian Essay s, p. 139. 



CHAP. II THE INDUSTRIAL PROPOSALS 23 

the argument applies with equal force to pictures by living 
masters. When such a picture is exhibited by its author 
against an entrance fee, the charge bears the same economic 
character as that made by a speculator for viewing the 
work of a dead master. Likewise, if it is desirable that 
" Raphael's pictures be fiilly accessible to every one," it is 
equally desirable with regard to modern pictures of ex- 
cellence. " Men must be prevented from owning them '* 
also. Therefore, in the opinion of this Fabian essayist, 
the production of paintings and other works of art for sale 
or exhibition must be placed under State management. 
Nor can the logic of this contention be easily disputed by 
other socialists. 

It is equally certain that professional services cannot be 
permitted to be performed on private account. Although 
the industrial proposals of Socialism do not necessarily 
involve such a change, its distributive proposals do involve 
it. In order that they may be carried out, all professional 
men must be employees of the State, rendering their 
services gratis or against a charge which must be paid, not 
to them, but into the revenue of local or central govern- 
mental bodies. This subject, as well as that of domestic 
service, literature, and science, can, however, be more con- 
veniently considered when the distributive proposals of 
Socialism are under examination. 



CHAPTER III 

THE INDUSTRIAL PROPOSALS — Continued 

The preceding examination has made it manifest that, in 
spite of the appearance of limitation in some socialist 
utterances, there exists a practical agreement between all 
socialists, which will be seen to be dictated by other 
principles held by them in common, requiring the sociali- 
sation of all industries the products of which enter the 
circle of exchanges. 

The industries thus excluded are, however, so trivial 
that they may conveniently be disregarded in any 
definition. There remain, however, some direct con- 
sequences of the above proposals to be considered before 
such a definition can be made. 

The first of these is the method by which Socialism 
proposes to acquire the ownership of land and capital. 
The prospectus of the Fabian Society states : — 

" If these measures be carried out without compen- 
sation (though not without such relief to expropriated 
individuals as may seem fit to the community), rent and 
interest will be added to the reward of labour.*' ^ 

The Fabian Essays supply even more definite 
information, viz. — "The progressive socialisation of 
land and capital must proceed by direct transference of 
them to the community through taxation of rent and 
interest and public organisation of labour with the capital 
thus obtained." * 

The above statements are the more valuable because 
the exponents of Socialism are generally more than 

* Sec ante^ P* I9» ' P. 140. 



CHAP. Ill THE INDUSTRIAL PROPOSALS 25 

reluctant to give clear expression to their intention on 
this subject. Taken by themselves — the context in no 
way alters their meaning — they would, however, lead to 
the conclusion that Socialism relied upon taxation alone 
for the establishment of its industrial system. That, 
however, is impossible. For if the State appropriates by 
taxation more than its current expenditure requires, it 
cannot keep the ever-increasing fund idly locked up in 
some vault. " The public organisation of labour with the 
capital so obtained" must proceed pari passu with its 
acquisition, in order that the gradual transformation 
from private to public industry may be realised. There 
are only two ways in which this can be done, viz. by 
the creation of new establishments through the purchase 
of land, machinery, and material, or through the purchase 
of already existing private establishments. 

At first, no doubt, the former process would be 
largely employed. As, however, increasing taxation 
results in a reduction of private profit, of rent, and 
of the value of land, and as the competition of untaxed 
State establishments reduces still further the value of 
fixed capital engaged in private enterprises, private 
industrial establishments could be purchased so cheaply 
that the second method would prevail. Such land as the 
State required would of course always be acquired by 
purchase at rates constantly falling with the increase of 
taxation. In this way the land and the capital would 
become the property of the community apparently with- 
out confiscation. In reality, however, no compensation 
would have been paid. For the owners themselves 
would furnish the compensation fund ; and the amount 
received by them as compensation could not exceed 
the amount paid by them in special taxation. Some 
of them would receive more than their contributions, 
but only on condition that others received less than 
theirs. 

Another method of transference is suggested by Mr. 
Laurence Gronlund in the following terms : — 

" We shall here make a digression to state definitely 
our position in regard to compensation to the dispossessed 



I 



26 DEMOCRACY VERSUS SOCIALISM part i 

owners of property which we left somewhat unsettled in 
the last chapter. 

**We suggested there that if the final change were 
accomplished by force, the State would possibly expro- 
priate our men of wealth without compensation whatever. 
Their existing rights are such which the law gives^ and 
what the law gives the law can take away. That would 
be done without any compunction of conscience, seeing 
that much of that wealth is obtained by questionable 
methods, and very much of it by the trickery of buying 
and selling, which never can create value. . . . But as a 
matter of policy the State may see fit to give the pro- 
prietors a fair compensation for that property which Society 
takes under its control, i,e. for its real and not its specu- 
lative value. But there are two important * buts ' to note. 
They will not receive any interest on the sums allowed them. 
When all interest has ceased to be legitimate throughout 
society, society will hardly charge itself with that burden. 

" They will not be paid in money ^ but in goods, in articles 
of enjoyment furnished in annuities to those whose claim 
is sufficiently large." ^ 

This statement shows that Gronlund is a catastrophic 
socialist, a survival of the past. Nevertheless, his proposal 
is worthy of examination, as being the only alternative to 
that of the Fabian Society, if the transfer is to be made 
gradually. For, though Gronlund considers it under the 
supposition of a sudden transformation of the existing 
into a full-blown socialistic system, it might be applied to 
a gradual transmutation. 
I The State might establish new or purchase existing 

industrial enterprises with bonds, and might gradually 
extend this process till all land and private industrial 
capital had passed into its possession. If the bonds were 
made interest-bearing and if the profit from State-con- 
ducted industries were sufficient to pay the interest, the 
compensation would so far be real. If, however, the 
profit were insufficient, a contingency which cannot be 
disregarded, taxation of land and capital would have to be 
resorted to, to the extent of the deficiency. In such case 

' A Co-operative Commomvealth^ pp. 135, 136. 



i 




CHAP. Ill THE INDUSTRIAL PROPOSALS 27 

the owners of land and capital would, to the same extent, 
provide their own compensation as in the plan advocated 
by the Fabian Society. 

In either case, however, the payment of interest could 
not be continued beyond the close of the transition period 
without a denial of the fundamental principles of Socialism. 
The bonds would then be repaid in the manner described 
by Gronlund, in annual instalments of consumption-goods, 
till the whole of the debt was extinguished. The pro- 
spective cessation of interest payments would, however, 
result in a gradual depreciation of the bonds, which 
would reach its maximum at the actual termination of 
the former. 

On the other hand, it is also possible to make the 
bonds non-interest-bearing from the first, and still subject 
to gradual extinction by delivery of consumption-goods. 
In this case the bonds would be at a great discount from 
the beginning. 

Whichever of these two systems were adopted, it is 
certain that many if not all the bonds would change 
hands during the period of their currency. The question 
would therefore be raised, whether the State should pay 
in full for bonds which had been acquired by their actual 
possessors at much reduced values ; nor can there be any 
doubt how it would be answered. 

Gronlund's plan, therefore, while some improvement 
on that of the Fabian Society from the point of view of 
landowners and capitalists, is no very great improvement 
even if it were practicable. The probability, however, is 
greatly in favour of a mixed system being adopted at the 
dictates of political expediency. If the socialists are 
strong enough to induce the State to enter upon the 
conduct of competitive industries, they will also have 
sufficient influence to impose special taxation upon land 
and capital. They may, however, easily be induced to 
extend the system of State -industry beyond the limits 
of the capital which such taxation would place at their 
disposal, and this could only be done by the issue of 
interest-bearing bonds. It is, however, inconceivable that 
these bonds would be made exempt from the taxation 



28 DEMOCRACY VERSUS SOCIALISM part i 

imposed on all other forms ot wealth, and the bond- 
holders would therefore furnish their own interest to an 
extent which, ultimately, would amount to the whole 
interest. Whichever plan, therefore, may be adopted, 
the compensation paid would fall far short of the value 
of the property appropriated, even short of that greatly 
reduced vaJue caused by State -competition or by State- 
competition combined with special taxation. Socialism, 
therefore, has no choice ; it must rely mainly on con- 
fiscation for the gradual transformation of private industry 
into collective industry. 

Attention must now be directed to some of the con- 
sequential changes in the existing industrial and financial 
organisation which are implied in the socialisation of land 
and capital. 

It involves the abolition of all indirect sources of 
private income and of the entire system of public and 
private credit as we know it. The taxation of incomes, 
gradually increasing, would ultimately absorb the interest 
of all state and municipal indebtedness, which then might 
be extinguished in the manner already described. Private 
credits, the interest from which would be taxable in the 
same manner, could not continue under a system in 
which the State would borrow and lend without interest, 
as will be described presently. 

Private exchange, both wholesale and retail, would 
equally disappear, giving way to State -conducted ware- 
houses. These indirect consequences involved in the 
realisation of the industrial proposals of Socialism are aptly 
described by Dr. Schaeffle in the following terms : — 

"The principle of Socialism is thus opposed to the 
continuance not only of private property in directly 
managed means of production (that is, in private business 
and joint-stock and other associations of capital), but also 
of individual ownership in indirect sources of income; 
i.e. to the entire arrangement of private credit, loan, hire, 
and lease — not only to private productive capital, but also 
to private /(?<?« -capital. State credit and private credit, 
interest-bearing capital and loan-capital, are incompatible 
with the socialistic state. Socialism will entirely put an 



CHAP. Ill THE INDUSTRIAL PROPOSALS 29 

end to national debts, private debts, tenancy, leases, and 
all stocks and shares negotiable at the bourse. . . . 
Socialism, from its premises, can no longer allow trading 
and markets, and it would be necessary even for coinage 
eventually to cease to exist and for labour-money (certifi- 
cates of labour) to take its place. ... If we suppose the 
production by private capitalists to be removed, and a 
unified, organised common-production in its place, buying 
and selling, competition and markets, prices and payment 
by money are at once superfluous. JVithin the socialised 
economic organisation they are even impossible."^ 

With a slight limitation, regarding public credit, which 
will be dealt with presently, this passage exhibits with 
much acumen some of the indirect consequences which 
necessarily must flow from the public assumption of 
ownership and management of land and capital. 

The socialisation of land and capital further implies their 
being vested in and managed by some constituted authority 
or authorities. Socialism proposes to vest such authority, 
as far as possible, in local governmental bodies, i.e. muni- 
cipalities, county councils, etc., and to confide to the 
direction of the central government as few of the socialised 
industries as possible. It must, however, be recognised 
that the limits of local control are drawn in a narrow circle 
by the nature of industries. Purely local industries, 
i.e. industries the products of which are destined for local 
consimiption alone, may be so managed with safety, as 
supply of water, gas, electricity, hydraulic and pneumatic 
power, as also local means of transport, as cabs, omnibuses, 
and tramways. Villages and very small towns might also 
undertake the local production and distribution of bread, 
meat, milk, and some other quickly perishable articles, 
though even in these instances complications from the 
overlapping of authorities could scarcely be avoided. 
Large towns and cities, which draw their supplies, even 
of these quickly perishable articles, from wide areas, could 
not possibly undertake even these limited functions. On 
the other hand, all those industries which produce easily 
transportable goods, as well as those means of transport 

^ Thi Sluintessence ofSocialitm^ pp. 64, 69, 70. 



30 DEMOCRACY VERSUS SOCIALISM part i 

which extend beyond local limits, must, by their very 
nature, be managed by one central authority, as agriculture, 
mining, manufactures, and the wholesale distribution of 
their products, as well as railways, rivers, canals, and 
shipping. The reason is obvious. The production of 
such industries must be kept in harmony with the require- 
ments of the community. In the absence of the com- 
petitive organisation this object can only be attained 
through an administration embracing and controlling the 
whole field of their production. These considerations 
make it clear that, with few and comparatively unim- 
portant exceptions, the management of socialised industries 
must be vested in the central government. 

The authority which manages any industry must also 
control the labour employed in it. The conduct of all 
industries by the State further imposes upon the State the 
duty to either find full employment for all its members at 
all times, or to provide full incomes, without any return in 
labour, during such times, if any, when employment can- 
not be found for all. Therefore the managing authority 
must possess power to appoint for each citizen the, kind of 
labour to which he is to devote himself, as wcu as the 
locality where his labour will be of the greatest service. 
Only by rigorously shifting labourers from an occupation 
and a place in which they have become superfluous, to 
occupations and places where their labour is required, can 
the requirements of the community be harmoniously 
supplied, and the simultaneous over-production of some 
goods and under-production of other goods be prevented. 

Stress must once more be laid on the fact that Social- 
ism does not contemplate the abolition of all private 
property, but only of private property in land and capital. 
That part of the annual product of the national labour 
and industry which is not required for the replacement, 
improvement, and extension of national capital, would be 
distributed among individuals in the shape of consumption- 
goods, and would become private property. Private 
ownership in consumption-goods would, therefore, continue 
in the socialised State. Nor is there any compulsion on 
individuals to abstain from saving. They could do so 



CHAP. Ill THE INDUSTRIAL PROPOSALS 31 

either by collecting durable consumption -goods in their 
own homes, or by withdrawing from the common fund a 
smaller amount of goods than they are entitled to, so as to 
accumulate a reserve on which they could draw at future 
times. Similarly, the State might advance consumption- 
goods to citizens on the security of their future labour 
contributions. The State, and this is the slight limitation 
on Dr. Schaeffle's pronouncement already alluded to,^could 
thus, consistently with the principles of Socialism, become 
the debtor and creditor of individuals, provided no interest 
were paid or charged, though such a course, as will be 
shown in Part IL, would give all the advantages of interest 
to the borrowers. Private loans, except in so far as they 
were prompted by charity, would absolutely cease, because it 
would be safer to allow savings to accumulate with the 
Government, than, in the absence of interest, to entrust 
them to some individual whose credit with the Government 
was exhausted. 

Rent of building sites would be paid, but would be 
payable to the Government. For it would be manifestly 
unjust to allot to some persons the best and most con- 
venient building sites, while others must be satisfied with 
inferior ones, without the exaction of an equivalent for 
the enjoyment of the superior advantage. The equality 
at which Socialism aims, therefore, requires the continu- 
ance of such rent-payments — a fact admitted by some.^ 
On the other hand, rent for agricultural land, mines, 
factory sites, and other natural opportunities of industry, 
would apparently disappear, the State being, with regard 
to them, tenant as well as landlord. 

The foregoing examination enables us to formulate 
a definition, perhaps not absolutely comprehensive, yet 
sufficient for all practical purposes, of what is implied in 
the industrial proposals of Socialism, viz. : — 

Socialism aims at the gradual abolition of private 
property in and private control of the instruments and 



1 (t 



A Socialist State or municipality will charge the full economic rent for the use 
of its land and dwellings, and apply that rent for the purposes of the community." — 
S. B. Webb, Prohiems of Modem Industry^ p. 278. The necessity or even consistency of 
charging rent of "dwellings," i.e. interest, is not apparent. 



32 DEMOCRACY VERSUS SOCIALISM part r 

materials of production, land/ transportation, trade, loan- 
capital, and public debts ; such abolition to take place 
without compensation, or through partial compensation 
only, of present proprietors as a whole. For these private 
rights it would substitute the collective ownership and 
management by the community, acting through local or 
centr^ governmental bodies, of the instruments and 
materials of production, land, transportation, trade, and 
loans, continuing private property in and private control 
of all consumption-goods awarded to individuals as their 
share of the industrial product. 

^ The term ** land " as used here and subsequently includes agricultural land^, 
building sites, mines, waterfalls, and all other natural opportunities. 



CHAPTER IV 



THE ETHICAL CONCEPTIONS 



The conception which Socialism has formed with regard to 
the relations existing between individuals and the social 
entity to which they belong, is totally opposed to that 
formed by Liberalism and Democratic Radicalism, and is 
practically identical with that prevailing under the despotism 
of the post-reformation period.^ Apart from socialists, it 
is, at the present time, to be found only among the belated 
survivals of that period, who march in the rear of English 
Toryism, or compose the junker-parties of Germany and 
Austria.^ 

It consists in the denial of the existence of abstract or 
natural human rights, and its converse, the assertion that 
all individual rights are derived from the State, as well as 
in the logical deduction from these premises, that any 

^ ^ All that it found within the limits of our State belongs to us by the same title. 
Yon may rest assured that kings have the right of full and absolute disposition over all 
the property possessed by the clergy as well as the laity, to use it at all times with wbe 
economy, that is, according to the general necessity of the State." — **Memoire8 de Louis 
XIV. pour r instruction dn Dauphin," Yves Guyot, La Frofr'iM. 

^ The Liberty of the subject lieth, therefore, in those things which, in regulating 
their action, the sovereign hath praetermitted. . . . Nevertheless, we are not to under- 
stand that by such liberty, the sovereign power of life and death is either abolished, or 
limited. For it hath already been shown that nothing the sovereign representative can 
do to a subject on what pretence soever can properly be called injustice or injury ; . • . 
and the same holdeth also in a sovereign prince that putteth to death an innocent 
subject. For though the action be against the law of nature, as being contrary to equity, 
•s was the killing of Uriah, by David, yet it was not an injury to Uriah, but to God." — 
«*The English Works of Thomas Hobbes," by Sir William Molesworth, Bart., vol. iii. 
LetfiasAati, pp. 99, 100. 

' ** Be it that there are natural rights — that is, in a state of nature, where there 
» nothing artificial. But men have formed themselves into a social state ; all is 
artificial and nothing merely natural. In such a state no rights ought to exist but 
what are for the general good — all that are should." — Lord Bramwell, Land and 
Csfkal, The Pseudo-Scientific Theory ofMen*s Natural Rights, W. H. lAtsWocky Studies of 
Cmtem f mmj Superstitions, 

D 



34 DEMOCRACY VERSUS SOCIAUSM part i 

and all such rights may jusdy be cancelled by the State, if 
the latter is of opinion that its interests will be served 
thereby. 

Thus Sidney Webb, in Socialism in England^ states, 
p. 79 : "A wide divergence of thought is here apparent 
between England and the United States. In England the 
old a priori individualism is universally abandoned. No 
professor ever founds any argument, whether in defence 
of the rights of property or otherwise, upon the inherent 
right of the individual to his own physical freedom and 
to the possession of such raw material as he has made his 
own by expending personal effort upon. The first step 
must be to rid our minds of the idea that there are any 
such things in social matters as abstract rights " {The State 
in Relation to Labour y chap. i. p. 6, by the late W. Stanley 
Jevons). . . . "The whole case on both sides is now made to 
turn exclusively on the balance of social advantages." 
Laurence Gronlund formulates the theory as follows, in 
The Co-operative Commonwealth^ pp. 82, 83, and 85 : — 

" It " (the conception of the State as an organism), 
'* together with the modern doctrine of evolution as applied 
to all organisms, deals a mortal blow to the theory of 
* man's natural rights,' the theory of man's inalienable 
right to life, liberty, property, happiness, etc. . . . These so- 
called * natural rights ' and an equally fictitious ' law of 
nature ' were invented by Jean Jacques Rousseau. Philo- 
sophic socialists repudiate that theory of ' natural rights.* 
It is Society, organised Society, the State, that gives us all 
the rights we have, ... As against the State, the organised 
Society, even Labour does not give us a particle of title to 
what our hands and brain produce." 

In addition to these socialist authorities, an opponent 
of authority may also be cited. Professor Robert Flint, 
who states in Socialism ^ P- 373 • — 

" It " (Socialism) " denies to the individual any rights 

independent of Society ; and assigns to Society authority 

to do whatever it deems for its own good with the persons, 

faculties, and possessions of individuals." 

r This denial of individual rights within the Society and 

, independent of that Society, naturally has, as correlative. 



CHAP. IV THE ETHICAL CONCEPTIONS 35 

the conception, that the State does not exist for the benefit 
of the individuals composing it, at any given time ; that 
it is an independent organism, possessing an entity and 
purpose of its own, and that therefore the will, not only 
of any one individual, but of all individuals, is subordinate 
to the will of the State. Thus, again quoting from Soci- 
alism in England^ pp. 82, 83, Sidney Webb states : — 

" The lesson of Evolution, at first thought to be the 
apotheosis of anarchic individual competition, is now recog- 
nised to be quite the contrary. . . . Even the Political 
Economists are learning this lesson, and the fundamental 
idea of a social organism paramount over and prior to the 
individual of each generation is penetrating to their minds 
and appearing in their lectures." 

Laurence Gronlund's exposition of the theory is too 
lengthy for quotation in full ; the concluding sentences 
{The Co-operative Commonwealth^ P- 81) read: — 

" We therefore insist that the State is a living organ- 
ism, diflFering from other organisms in no essential respect. 
This is not to be understood in a simply metaphorical 
sense ; it is not that the State merely resembles an 
organism, but that it — including with the people, the land 
and all that the land produces — ^literally is an organism^ 
personal and territorial. 

" It follows that the relations of the State, the body 
politic, to us, its citizens, is actually that of a tree to its 
ceUs, and not that of a heap of sand to its grains, to which 
it is entirely indiflFerent how many other grains of sand are 
scattered and trodden underfoot. 

" This is a conception of far-reaching consequence." 

The consequences which Gronlund draws from this 
conception are exhibited in the preceding quotation from 
his work. That they are far reaching cannot be denied. 
It would be inopportune, at this stage of our inquiry, to 
examine them or to criticise these conceptions themselves. 
All that can conveniently be done here, is to show that 
these ideas form part of the " scientific " synthesis which 
Socialism claims as its foundation. 

It is, however, necessary to point out that this con- 
ception of the relations between the State and the in- 



36 DEMOCRACY VERSUS SOCIALISM part i 

dividuals composing the State is not adopted arbitrarily 
by the authorities which have been quoted. It is a 
necessary consequence of the basic conceptions as well as 
of the industrial and distributive proposals of Socialism. 
For the admission of individual rights, prior to and in- 
dependent of the State, would stamp these proposals as in 
the highest degree unjust and despotic. Their defence, 
\ on the ethical side, cannot, therefore, be undertaken except 
on the supposition that no such rights exist, and that all 
human rights emanate from and are dependent upon the 
arbitrary will of the State. 

To the labourer belongs the fruit of his toil, is 
generally regarded as the only ethical standard of economic 
justice. Socialism utterly denies the truth of this proposi- 
tion, and teaches that the fruits of individual labour belong, 
not to the labourer, but to the society of which he forms 
part, to be used by it in such manner as may, in its 
opinion, promise the best social results. Citing again 
Laurence Gronlund, we find the following clear and 
emphatic statement of this conception on p. 145 of The 
Cooperative Commonwealth : — 

" A man is entitled to the full proceeds of his labour 
against any other individual, but not against society. Society 
is not bound to reward a man either in proportion to his 
services, nor yet to his wants, but according to expediency ; 
according to the behests of her own welfare. Man's work 
is not a quid pro quOy but a trusts 

This doctrine is based on several different and com- 
plementary lines of reasoning. One, mechanical, derives 
communistic proprietary rights from the far-reaching 
co-operative processes of modern industry, rendering it 
impossible to discover which part of any finished product 
and what share in its value owes its existence to the 
labour of any individual co-operator, and posits that it is 
equally impossible to assign to any of them equitable 
proprietary rights in any part, or in the value of such 
product. Thus W. D. P. Bliss, in A Handbook of 
Socialism^ p. 188, states : — 

" Nor can the principle that capital should be private 
property, because it is the work of man, be allowed in 



CHAP. IV THE ETHICAL CONCEPTIONS 37 

equity, since it is practically impossible to say what man 
produced any given portion of capital. All successful 
production to-day, mental and manual alike, is the result 
of social processes so intricate that it is impossible to 
measure the share in the production taken by any one 
man." Says Edward Bellamy : " Nine hundred and ninety- 
nine parts out of the thousand of every man's produce are 
the result of his social inheritance and environment." 

While this argument is mainly directed to prove the 
impossibility of allotting to each labourer the fruits of his 
toil, another boldly asserts its inequity. Taking the 
theories of evolution and of value for its basis, it asserts 
that individual capacity and industry are the result of 
heredity, arising from the ancestral struggle for existence. 
Being thus the result of social causes, their product belongs 
to Society, and not to the individual who accidentally 
possesses them. Allied to this is the further conception, 
that the value of any labour product, arising not from the 
act of the producer, but from the desires of the consumers, 
i.e. from a social cause, such value cannot equitably belong 
to the producer, but only to Society as a whole. 

Still another line of reasoning deduces social ownership 
of labour products from the influence of the social en- 
vironment, both on the labourer and the produce of his 
labour. 

The following quotations show examples of these 
several and cognate arguments. Sir Henry Wrixon 
attributes to Sidney Webb the following statement 
{Socialismy p. 83) : — 

"The socialists would nationalise both rent and in- 
terest, by the State becoming the sole landowner and 
capitalist. . . . Such an arrangement would, however, 
leave untouched the third monopoly, the largest of them 
all, the monopoly of business ability. The more recent 
socialists strike, therefore, at this monopoly also, by allot- 
ting to every worker an equal wage whatever the nature of 
the work. This equality has an abstract justification, as 
the special ability or energy with which some persons are 
born is an unearned increment due to the struggle for 
existence upon their ancestors, and consequently having 



38 DEMOCRACY VERSUS SOCIALISM part i 

been produced by Society, is as much due to Society as the 
* unearned increment of rent.' " 

In the Fabian Essay Sy p. 127, the following opinion is 
expressed : — 

'* For now, for the first time since the dissolution of 
the early tribal communisms, and over areas a hundred 
times wider than theirs, the individual worker earns his 
living, fulfils his most elementary desires, not by direct 
personal production, but by an intricate co-operation in 
which the eflfect and value of his personal eflforts are 
almost indistinguishable. The apology for individualistic 
appropriation is exploded by the logic of the facts of com- 
munist production ; no man can pretend to claim the 
fruits of his own labour, for his whole ability and oppor- 
tunity for working are plainly a vast inheritance and 
contribution of which he is but a transient and accidental 
beneficiary and steward, and his power of turning them to 
his own account depends entirely upon the desires and 
needs of other people for his services. The factory 
system, the machine industry, the world commerce, have 
abolished individualistic production." 

In Equality y Edward Bellamy's latest work, the follow- 
ing argument occurs : — 

" All human beings are equal in rights and dignity, and 
only such a system of wealth distribution can therefore be 
defensible as respects and secures those equalities. The 
main factor in the production of wealth among civilised 
men is the social organism, the machinery of associated 
labour and exchange by which hundreds of millions of 
individuals provide the demand for one another's product 
and mutually complement one another's labours, thereby 
making the productive and distributive systems of a nation 
and or the world one great machine. . . . 

** The element in the total industrial product, which is 
due to the social organism, is represented by the diflTerence 
between the value of what one man produces as a worker 
in connection with the social organisation and what he 
could produce in a condition of isolation. ... It is 
estimated that the average daily product of a worker in 
America is to-day some fifty dollars. The product of the 



CHAP. IV THE ETHICAL CONCEPTIONS 39 

same man working in isolation would probably be highly 
estimated on the same basis by calculation if put at a 
quarter of a dollar. To whom belongs the social organism, 
this vast machinery of human association, which enhances 
some two hundredfold the product of every one's labour ? 
. . . Society collectively can be the only heir to the social 
inheritance of intellect and discovery, and it is Society 
collectively which furnishes the continuous daily concourse 
by which alone that inheritance is made efFective." ^ 

On these grounds, Socialism boldly pronounces 
judgment against the older standard of industrial ethics, 
and declares, that not to the labourer who produces it, but 
to Society collectively, belongs the wealth which any man's 
labour produces, and that Society has absolute and exclusive 
proprietary rights in all the produce of individual labour. 

* Pp. 79, 80. 



CHAPTER V 

THE DISTRIBUTIVE PROPOSALS 

The ethical conceptions which Socialism entertains, i.e. 
that of the non-existence of natural rights, and that of the 
inequity of the labourer possessing the fruits of his exertion, 
are, as has already been stated, a necessary outcome of its 
industrial and distributive proposals. The original object 
of Socialism was no doubt the achievement of justice in 
distribution — to supplant the undoubtedly unjust dis- 
tribution prevailing now by a just and equitable apportion- 
ment of the products of labour among those who, by their 
individual exertions, have given it existence.^ So far, 
however, socialists have been unable to arrive at an agree- 
ment among themselves as to what would constitute a just 
system of distribution. Moreover, nearly all the proposals 
of distribution which have been advocated, and all the 
proposals which are open to Socialism, offend against the 
conception of justice embodied in the teaching that man 
possesses inalienable natural rights, and that one of these 
consists in the right of every individual to the possession 
\ and enjoyment of the fruits of his own toil. 

Professor Ely enumerates four standards of distributive 
justice possible under Socialism : — 

( I ) Absolute mechanical equality, Le. allotting to each 
an equal quantity and quality of the various consimiption- 
goods available for distribution. 

^ '* We might define the final aim of Socialism to be an equitable system of dis- 
tributing the fruits of labour." — Kirkup, An Lifuhy into Socialism^ p. 105. 

" Socialists wish to secure justice in distribution, but they have not yet been able 
to agree upon a standard of distributive justice, although they now generally seem dis- 
posed to regard equality in distribution as desirable." — Ely, Socialim. 



CHAP. V THE DISTRIBUTIVE PROPOSALS 41 

(2) Hierarchical distribution, i.e. allotting to each a 
general command over consumption-goods, equal in value 
to the services rendered by him, lessened by a proportional 
deduction to supply the values required for the renewal, 
improvement, and extension of the social capital. 

(3) Distribution according to needs, i.e. allotting to 
each sufficient to satisfy his reasonable needs, regardless of 
the value of the services rendered. 

(4) Equality of income in value, i.e. allotting to each 
an equal general command over consumption-goods, re- 
gardless of the value of the services rendered, but leaving 
the selection of the goods within the allotted value to the 
varying individual desires. 

The first of these four possible methods of distribution 
may be disregarded here, as it is not now advocated by 
any school of socialists, and is obviously impossible in any 
large community. 

The second standard — that of distribution according 
to service rendered — is the one which naturally would 
present itself as most nearly in accordance with the gener- 
ally accepted conception of justice. It has been advocated 
accordingly by many socialists, and is still presented as 
their ideal by many when addressing popular audiences.^ 
Another section, leaning more to Communism, and accord- 
ingly looking to beneficence more than to justice as a 
social regulator, has advocated, and in some measure still 
advocates, the third standard, i.e. distribution according 
to needs. The Gotha platform of the Social Democratic 
Party of Germany (1875)^ ^^7^ ^^ down that "to Society 
— that is, to all its members — belongs the entire product 
of labour by an equal right, to each one according to his 
reasonable wants, all being bound to work." 

^ ** Men come greativ to desire that these capricious gifts of nature might be inter- 
cepted by some agency having the power and the goodwill to distribute them justly 
according to the labour done by each in the collective search for them. This desire is 
Socialism." — Fabian Essays, p. 4. 

^*In the Commonwealth the men will be rewarded according to results, whether 
they are mechanics or chiefs of industry, or transporters or salesmen. . . . But in regard 
to the work of the chiefs of industry and professionals, they, undoubtedly, will institute a 
new graduation of labour. There will be no more ^10,000 or ^CS^^^^* ^^ ^^''^ £iooq 
salaries paid. . . . When * business ' is done away with, then their services will be com- 
pared with manual work, as they ought to be, and paid for accordingly." — Gronlund, 
Co-oterathve Commonwealth, pp. 143, 144, and 145. 

^ Ante, P« '5* 



42 DEMOCRACY VERSUS SOCIALISM part i 

It is this passage which has caused Dr. Schaeffle to 
alter his opinion with regard to the distributive proposals 
of Socialism,^ and to state : 

"Communism had already, in 1875, become the pro- 
gramme of the German Social Democrats, and since then 
has become more and more their widespread conviction ;" ^ 
and he defines Communism as (a) universal obligation to 
equal labour ; (i) distribution by the community according 
to socially recognised " reasonable needs " of each. 

The silence of the Erfurt Programme on this subject 
seems, however, to indicate that Dr. Schaeffle may be in 
error in the latter part of his statement. English socialists, 
moreover, have but rarely advocated this method, and they 
as well as others seem to have arrived at the conclusion 
that the only possible standard under Socialism is the 
fourth, i.e. equal distribution in value, regardless of the 
value of service.* 

An examination of these rival systems inevitably leads 
to the conclusion that English socialists are right, that the 
method which they advocate is the only one not obviously 
impossible under Socialism. 

Apart from the manifest impossibility of determining 
the " reasonable needs " of any one, in the absence of any 
universal standard for the measurement of needs, distri- 
bution according to socially recognised needs, if honestly 
administered, would generally allot smaller incomes to the 
young and able workers than to feeble and old members 
of the society. For though the former contribute more to 
the social income, their needs are few and simple ; whereas 
the latter, who contribute less, possess, by reason of their 
infirmity, greater and more varied needs. Moreover, the 
needs of every person would have to be estimated either 
by himself or by some distributer or distributing body. 
If the estimate of the claimants were accepted, the utmost 

^ Ante^ P« 17" ' 3"^ Impossibility of Social Democracy y p. 54. 

* *'The fourth idea of distributive justice, and that which seems now to prevail 
generally among socialists, is equality of income — not a mechanical equality, but equality 
in value." — Ely, Socialism^ p. 16. 

** The impossibility of estimating the separate value of each man's labour with any 
really valid result, the friction which would arise, the jealousies which would be pro- 
voiced, the inevitable discontent, favouritism, and jobbery that would prevail — all these 
things will drive the Communal Council into the right path, equal remuneration of all 
workers." — Fabian Essays, pp. 163, 164. 



cHAP.v THE DISTRIBUTIVE PROPOSALS 43 

resources of the State would probably be insufficient to 
satisfy all the needs of all of them. If the determination 
were left with some distributers, their decisions, even if 
arrived at with the utmost care and impartiality, would, 
nevertheless, provoke general discontent. Such impar- 
tiality cannot, however, be expected. Inevitably the needs 
of influential and favoured persons would be over-estimated 
and those of powerless persons under-estimated ; jobbery 
and corruption would undermine the system, and return 
to a method less exposed to corrupt partiality and more 
in accord with the interests of the great body of workers 
would become inevitable. 

Distribution according to the value of services rendered 
is even more impracticable under Socialism. As already 
pointed out, socialists justly observe — though they base 
upon it conclusions not warranted by the facts — that the 
co-operative processes of modern industry obscure the 
individual origin of the final product, and make it im- 
possible to determine which part of the whole, or of its 
value, is due to the labour of any one of the co-operators. 
No one can determine the respective contributions of 
managers, clerks, book-keepers, spinners, weavers, and 
carters, to the value of a bale of cotton cloth which their 
joint labour has produced. Still less possible is it for the 
socialised State to find a common denominator for the 
value of services rendered in diflferent occupations. How 
many hours' work of a weaver equal an attendance by a 
great physician ? How much flannel will equal the value 
of a great picture ? How many hours of a navvy's work 
will equal one hour's work by a specially skilled mechanic ? 
Competition settles these questions ; in the absence of 
the self-regulating action of competition, which Socialism 
posits, it is impossible to ascertain the value of any man's 
services, or the value of any labour product, and, there- 
fore, equally impossible to reward any one in accordance 
with his services. The attempt to adopt this standard of 
distributive justice would, therefore, result in an absolutely 
arbitrary distribution of the social product, and, as the 
Fabian essayist rightly admits, in friction, jealousy, 
favouritism, jobbery, and corruption. 



44 DEMOCRACY VERSUS SOCIALISM part i 

There remains, as the last of the theoretically possible 
systems of distribution under Socialism, that of equal 
reward in value, regardless of the differing value of 
services rendered. This reward would probably be 
ascertained by taking the value of last year's total pro- 
duction, deducting from the same the amount required for 
the replacement and extension of national capital, and 
dividing the remainder by the total number of claimants, 
and placing the resultant amount to the credit of each, to 
be drawn against — by the selection of consumption-goods 
— at such times and places and in such variety as individual 
preference would dictate. 

This method, offering fewer difficulties than dis- 
tribution according to service, is, however, not free from 
objection. The latter method, as has been shown, is 
impossible, because it leaves to the distributing agency 
the arbitrary determination of the value of each person's 
services and of the value of every commodity. Equality of 
distribution in value, while eliminating the former difficulty, 
leaves the latter in full force. Which is the standard of 
measurement by which, in the absence of competition, the 
value of all the various labour-products can be deter- 
mined? The reply of socialists is, that labour- time 
furnishes such a standard. One hour of any person's 
labour will be regarded as conferring the same value on 
the resulting product as one hour of any other person's 
labour. Even if it be admitted that, under Socialism, 
purchasers will value the result of a year's work by a 
talented painter no higher than that of a year's work by 
an ordinary sempstress, or that people will be no more 
anxious to live in well-constructed houses than in those 
badly constructed, great inequality of reward would arise 
in respect of ordinary consumption-goods. 

Take boots as an example. Even under Socialism 
boots will largely vary in quality, though made within the 
same labour-time. Not only are there wide differences in 
quality between various kinds of leather, but the skin 
from one part of an animal's body yields inferior leather 
to that from another part. These differences are supple- 
mented by variations in the more or less skilful treatment 



CHAP. V THE DISTRIBUTIVE PROPOSALS 45 

of skins and by difFerences of skill in manufacturing boots. 
Yet, if labour-time determines value, no notice can be 
taken of the resulting variations in quality, and boots 
differing widely in durability, sightliness, and comfort, 
must be valued alike and must be sold at the same price. 
In other articles, such as furniture, ornaments, feminine 
apparel, and others, where artistic merit and fashion 
largely determine value, labour -time as the measure of 
value must lead to still greater inequality of benefit. 

Seeing that labour-time is not a possible standard ot 
value ; seeing that no other has ever been suggested as a 
substitute for competition, it follows that values must be 
arbitrarily determined by the action of State officials, with 
all the consequences of inequality of treatment, jobbery, 
and corruption. As, however, all possible methods of 
distribution under Socialism are open to the same objec- 
tion ; as equal distribution in value confines such arbitrary 
interference within narrower limits than any other, it must 
be regarded as the least injurious method. 

Equality of reward, however, as an inevitable con- 
sequence, entails compulsory labour for all who are not 
physically or mentally incapable. For it would be unjust, 
demoralising, and, in the end, impracticable, to award to 
idlers, capable of work, the same reward as to industrious 
workers. Some system of compelling idlers and malingerers 
to work, is, therefore, a necessary consequence of the 
system of equal distribution. The following statement, 
therefore, seems fully justified by the ethical conceptions 
of Socialism, by actual proposals made by large sections 
of socialists, and by general considerations : — 

No system of distribution is possible under Socialism, 
which does not necessitate the arbitrary, and, therefore, 
corruptive interference of State officials. The one which 
confines such arbitrary interference within the narrowest 
limits is the allotment to each of an equal share, measured 
by value, in that part of the total social income which is 
available for distribution, accompanied by some system of 
compulsion to honestly assist in the production of the 
social income or render other service to the community. 

This, the only method of distribution open to Social- 



46 DEMOCRACY VERSUS SOCIAUSM part i 

ism, involves, however, further consequences. Equality 
of distribution cannot stop at any arbitrary line, but must 
include all workers, whatever the nature of their work. 
Lawyers, doctors, actors, musicians, painters, journalists, 
litterateurs y and scientists can no more be placed apart and 
allowed to earn any income they can than can architects, 
surveyors, engineers, and exceptionally skilful mechanics. 
The difficulties which beset the distribution of wealth in 
the socialistic State, therefore, enforce the subjection of all 
these classes of workers to the directive and controlling 
superintendence of the State. As they are paid by the 
State, so they must work under the control of its officials, 
and these officials must determine the number of those 
who shall exercise their talents in these professions, and 
their respective locations ; while those who by them may 
be deemed superfluous must be directed into other 
avenues of employment. Such control, therefore, implies 
the selection, by State officials, of the men who shall act as 
lawyers, doctors, actors, musicians, painters, and sculptors, 
journalists, litterateurSy and scientists. Any men not so 
selected would have to abstain from such pursuits, unless 
they carry them on after ordinary working hours. Even 
if they do so, they cannot sell their pictures and statues, 
but must give them away, and if they publish the results 
of their labours, they must do so at their own expense, 
unless they can induce the proper officials to do it at the 
expense of the State. In neither case would they receive 
any payment for their books. 

Domestic servants could no more be allowed to 
bargain for their reward than other classes of labour. 
Equality of distribution would, however, cause domestic 
service to become so rare an occurrence that it would take 
a new form, probably one which would resemble the 
existing organisation of professional nursing. The pro- 
fessional servants would, however, be paid by the State, 
who might deduct fees for their service from the credit of 
those who occasionally employ them. 



CHAPTER VI 

MODIFICATIONS OF FAMILY RELATIONS 

Many socialist writers advocate changes in the existing 
marital relation, equally extravagant and repulsive. Dis- 
regarding all such advocacy, as possibly the mere outcome 
of individual idiosyncrasy, we shall inquire here what are 
the changes in the constitution of the family which the 
adoption of Socialism must produce. 

Equality of reward, rendering women economically 
independent, must powerfully afreet the relation of the 
sexes to each other. Women will no longer be driven 
into loveless marriages by fear of destitution or desire for 
wealth ; nor will such considerations prevent them from 
seeking the dissolution of unions which have grown dis- 
tasteful. 

The compulsion, accompanying the right to equal 
reward, to render industrial labour equally with men, must 
lead to further modifications. Women whose energy is 
expended in industrial work cannot preserve the comfort 
or even decency of an individual household. Even if 
they were able to undertake the additional work required 
it would be done perfunctorily, their interests lying else- 
where. That this distaste for and inability to perform the 
duties of the household is a necessary outcome of the 
industrial occupations of women is shown by present-day 
experience. An experienced observer, himself a socialist, 
remarks : — 

"The growth of factory work among women has 
brought with it inevitably a weakening of home interests and 
a neglect of home duties. . . . Home work is consciously 



48 DEMOCRACY VERSUS SOCIAUSM part i 

slighted as secondary in importance and inferior because it 
brings no wages, and if not neglected is performed in a 
perfunctory manner, which robs it of its grace and value. 
This narrowing of the home as a place of hurried meals 
and sleep is, on the whole, the worst iryury modern industry 
has inflicted on our lives, and it is diflicult to see how it can 
be compensated by any increase of material products. 
Factory life for women, save in extremely rare cases, saps 
the physical and moral health of the family. The 
exigencies of factory life are inconsistent with the position 
of a good mother, a good wife, or the maker of a home."^ 

This lessening of home interests and neglect of home 
duties must inevitably lead to the disappearance of separate 
family homes under Socialism. Married couples, as well 
as adult single persons, would occupy one or two rooms in 
what may best be described as boarding-houses, the service 
in which would be performed exclusively by professional 
attendants. 

The industrial services demanded of mothers must 
prevent due care being given to children, especially during 
their earlier years, nor could such care be given under 
the conditions imposed by residence in boarding-houses. 
Children would therefore be handed over to the care of 
the State at as early a period after birth as is practicable. 

These, then, are immediate and obviously inevitable 
results of Socialism : — 

Economic independence of women, abandonment of 
separate family homes, early separation of children and 
\ parents, and transference of the former to the care of the 
\ State. 

The life of the family as it now exists, therefore, would 
disappear, and the new life must profoundly aflfect the 
relation of the sexes as well as the propagation of the race. 
The probable nature of these consequential changes will 
form the subject of subsequent inquiry. 

^ Hobson, Evolution of Modern Capitalisnty p. 320. 



\ 



CHAPTER VII 



THE POLITICAL CONCEPTION 



Socialism contemplates a state of society in which the 
incomes of all citizens are equal, and in which all citizens 
earn their incomes in the service of the State. Equality is \ 
one of its principal aims ; merit the only claim for pro- \ 
motion to influential though not better paid positions. It i 
follows that the socialistic State must aim at political 
equality as much as at economic equality, and that it cannot 
recognise any political privileges outside its own bureau- 
cratic (superintending and organising) circle. Socialism, 
therefore, is democratic in the sense that it demands the 
abolition of political privileges and the extension of equality 
in the franchise to all adult persons of both sexes. 

Practical considerations would have forced this attitude 
upon Socialism, even if it were not a necessary outcome of 
its distributive proposals. 

The fundamental proposals of Socialism involve the 
expropriation of the possessing classes, who are also the 
incumbents of political privileges. Among these classes 
it cannot, therefore, expect to make more than an 
occasional convert. The nature of their proposals, there- 
fore, compels socialists to rely mainly on die masses of the 
people who possess little or no property, and some of 
whom are as yet excluded from any or from an equal 
participation in the franchise. 

The equalising tendency of Socialism also makes its 
existence incompatible with that of a hereditary aristocracy 
and of a monarchy. The abolition of private property in 
land puts an end to hereditary aristocracy, and the equal 



50 DEMOCRACY VERSUS SOCIALISM part i 

distribution of the social income is irreconcilable with 
monarchical institutions. Hence Socialists are Republicans 
as well as Democrats. 

Out of the industrial proposals of Socialism there 
arises also a tendency towards the decentralisation of the 
functions of government. The conduct of localised 
industries by local bodies presupposes the existence of such 
local bodies, and would considerably increase their functions 
and power. Moreover, while proposing to add enormously 
to the power and functions of the central government, 
socialists seem nevertheless to recognise to some slight 
extent that this extension of power and functions may 
foster despotic tendencies. They are, therefore, anxious 
to limit the power of the central government as far as is 
compatible with the due exercise of its industrial functions, 
and pari passu to extend the power of local governments. 

The narrow limits within which the industrial functions 
of local governments are confined by the nature of industries 
has already been indicated. It is less easy to indicate the 
limit to their regulative functions outside of industrial 
matters. That some extension in this direction is possible 
may be granted, but in countries of advanced democratic 
type like the United Kingdom, the United States, and 
several British colonies, this extension cannot be far- 
reaching. Nay, it may even be that, in one respect, 
Socialism may prove a bar to the development of local 
government. 

The local administration of schools and of education is 
everywhere one of the claims of democratic parties, and 
there can be little doubt that considerable progress in this 
direction will be made in the near future. But such local 
administration must, and is intended to, result in diversity. 
It may, therefore, lead to considerable difference in the 
educational advantages offered in different localities, an 
inequality of opportunity incompatible with the funda- 
mental principles of Socialism. While it must be admitted 
that the desire for decentralisation exists among socialists, 
and that it is not opposed to the principles of Socialism, it 
nevertheless appears that the decentralisation possible in 
the socialistic State will by no means be of sufficient im- 



CHAP. VII THE POLITICAL CONCEPTION 51 

portance to counteract the additional power which the 
assumption of industrial and distributive control will confer 
upon the central government. 

On the other hand, Socialism necessarily tends to a 
further centralisation, that of internationalism. The 
ramifications of modern industry extend far beyond the 
limits of any State. No nation is or ever can again be 
industrially self-contained. The problem of achieving a 
balance between production and consumption cannot, there- 
fore, be successfully solved by an authority which is con- 
fined to the limits of a single State. Hence, socialists aim, 
more or less consciously, at some international industrial 
federation, the executive of which shall regulate the con- 
duct of all industries of international character. 



CHAPTER VIII 



IS SOCIALISM SCIENTIFIC 



One of the claims most frequently and passionately urged 
by modern socialists is, that their system has emerged from 
the empirical stage and has become scientific. Neverthe- 
less, this claim appears to be unfounded. Knowledge 
becomes science through the systematic arrangement of 
the natural laws by which a group or groups of related 
facts or phenomena are governed, and in their interpretation 
through causal connection, so that from that which is 
observable conclusions can be formed with regard to that 
: which is not observable. The essential condition through 
which a mere collection of facts becomes a science is, 
therefore, the discovery and tabulation of the invariable, 
natural laws which govern their appearance. Any system 
which applies such natural laws to man's needs, is a system 
based on science, i.e. scientific. Thus navigation is 
scientific, inasmuch as it is based on the sciences of 
mathematics and astronomy ; -a scientific system of medi- 
cine is based on the natural laws tabulated by the sciences 
of biology and chemistry ; a scientific system of mining is 
based on geology, etc. Likewise any system of politics 
■ will be scientific, if it is based on well-ascertained natural 
laws governing the conduct of man in society. But if any 
' political system is not based on such natural laws, still 
. more if it is based on the express denial of the existence 
: of such laws, it cannot be scientific ; it is a mere empirical 
. conception. 

This is the position of Socialism. The most prominent 
of the conceptions on which it is based is, that there are 



CHAP. VIII IS SOCIALISM SCIENTIFIC 53 

no natural laws which govern the distribution of wealth ; 
that distribution may be governed by municipal enact- 
ments alone, and that, therefore, its arbitrary regulation is 
a necessary function of the State, and the only means by 
which justice in distribution can be achieved. Whether 
this conception is true or not does not concern us here. 
If true, then Socialism is not scientific, because there is 
no science on which it can be based ; if untrue, then 
Socialism is imscientific, because it disregards the science 
on which the economic part of politics must be based. 
This denial of natural law, therefore, whether in itself it 
is true or not, destroys the claim of Socialism to be 
considered scientific, and proves that it is based on un- 
verified or unverifiable interpretations of facts, the causal 
connection of which is either unknown or disregarded. 

The ethical conceptions on which Socialism is based 
are equally empirical and equally deny the possibility of 
any moral science. For the conception of a right includes 
that of a duty to respect that right. The denial of natural 
rights, therefore, involves the denial of natural duties. If 
all rights are granted by the State, all duties are imposed 
by the State. Moral conduct, therefore, is conduct 
according to law ; there is no standard by which the 
morality of any law may be determined, for the existence 
of the law constitutes its morality. Morality, therefore, 
has no existence ; it is merely a secondary term for legality. 

As in the case of economics, therefore. Socialism is 
unscientific, whether this denial of ethics, and, consequently, 
of ethical science, is true or untrue ; if true, because there 
is no ethical science on which its proposals can be based ; 
if untrue, because its proposals disregard the laws which 
that science has established. 



CHAPTER IX 

THE DEFINITION OF SOCIALISM 

The foregoing examination enables us to give a compre- 
hensive definition of Socialism, as follows : — 

Socialism is an empiric system of organisation of social 
life, based on certain ethical and economic conceptions. 
Its ethical conceptions consist, generally, of the denial of 
individual natural rights and the assertion of the omni- 
potence of the State ; specially, of the denial of the right 
of the individual to the possession of the products of his 
labour, and the assertion of the right of the State to the 
possession of the products of the labour of all individuals. 

Its economic conceptions are, that competition and 
private property in land and capital, and the consequent 
exaction of rent, interest and profit, i.e. surplus value, by 
private persons, are social evils, responsible for the material 
and mental destitution of vast masses of the people. 

On these conceptions are based its industrial, distribu- 
tive, and political proposals. They are : The gradual 
abolition of private property in and private control of the 
instruments and materials of production, land, transporta- 
tion, trade, loan-capital, and public debts ; such abolition 
to take place without compensation, or through partial 
compensation only, of present proprietors as a whole. For 
these private rights it would substitute the collective 
ownership and management by the community, acting 
through local and central governmental bodies, of the 
instruments and materials of production, land, transporta- 
tion, trade, and loans, continuing private property in and 
private control of all consumption - goods awarded to 

\ 

V 



CH. IX THE DEFINITION OF SOCIALISM 55 

individuals as their share of the products of the national 
indxistry. 

The only arrangement possible under Socialism, for 
awarding to individuals a share in the products of the 
national industries, is, to allot to each an equal share, 
measured by value, in that part of the national income 
which remains, after due deduction has been made for the 
replacement and extension of national capital. The only 
possible standard of value, labour-time, however, would 
lead to inequality in the share of the national income 
obtained by each, and must, therefore, be supplemented or 
superseded by the arbitrary determination or the value of 
all products by State officials. 

The political proposals of Socialism are : equal political 
rights for all adult individuals of both sexes ; extension 
or the powers and functions of local governmental bodies, 
and international control of international production and 
trade. 

These proposals entail certain consequential changes in 
social organisation. 

The management by the State of all production and 
trade involves a numerous graduated body of officials for 
the control of the individuals employed, and the deter- 
mination of the kinds, qualities, and quantities of goods to 
be produced. These officials must determine the occupa- 
tion and place of employment of all individuals of both 
sexes. 

The distributive proposal involves some system of 
compulsion to honestly assist in the production of the 
national income, or to render other service to the com- 
munity ; as also, the control of all literary, journalistic, 
artistic, and scientific production, and the selection of 
those who shall engage in such production. It also in- 
volves the following changes in the constitution of the 
family : — Economic independence of women ; abandon- 
ment of separate family homes ; early separation of 
children and parents, and transference of the former to 
the care of the State. 



PART II 



ECONOMICS 



CHAPTER I 



MARX*S THEORY OF VALUE 



The basis of every politico-economic theory is to be found 
in its conception of value. For the world-wide industrial 
co-operation, which unites the nations of the earth into 
one economic society, depends for its existence upon 
exchange ; not only upon exchange of the final product, 
but also upon exchange of the numerous intermediate 
products which make their appearance during the produc- 
tion of every commodity. It also depends upon the still 
more numerous exchanges of labour and services for 
products. Exchange, however, is itself dependent upon 
the formation of a concept of value in the minds of the 
parties to the exchange. The view taken of the concept 
** value " must, therefore, fundamentally affect the aspect 
of our industrial organisation. 

Socialism, as has been shown, makes no exception to 
this rule. Its original German exponent, Rodbertus- 
Jagetzow, indicated a theory of value consistent with his 
general conceptions, which, subsequently, was developed by 
Karl Marx,^ who formulates it as follows : — 

" That which determines the magnitude of the value 
of any article is the amoimt of labour (labour-time) socially 
necessary for its production." * 

Marx also explains that the labour to which he refers 
must be imderstood in the following sense : — 

I . " The labour-time socially necessary is that required 

^ The theories of Rodbertus are traced to French, and those of Marx to English 
toorccs, by Anton Menger, The Right to the Full Produce of Labour, 
* Q^tsl^ P* 6 9 *tt for full quotation. Part I. chap. i. 



6o DEMOCRACY VERSUS SOCIALISM part ii 

to produce an article under the normal conditions of pro- 
duction, and with the average degree of skill and intensity 
prevalent at the time." ^ 

2. *' Skilled labour counts only as simple labour in- 
tensified, or rather, as multiplied simple labour, a given 
quantity of skilled being considered equal to a greater 
quantity of simple labour. Experience shows that this 
reduction is constantly being made. A commodity may 
be the product of the most skilled labour, but its 
value, by equating it to the product of simple unskilled 
labour, represents a definite quantity of the latter labour 
alone." ^ 

3. " Suppose that every piece of linen in the market 
contains no more labour-time than is socially necessary. 
In spite of this, all these pieces, taken as a whole, may 
have had superfluous labour-time spent upon them. If 
the market cannot stomach the whole quantity at the 
normal price of 2s. a yard, this proves that too great a 
portion of the total labour of the community has been 
expended in the form of weaving. The effect is the same 
as if each individual weaver had expended more labour- 
time upon this particular product than is socially necessary. 
Here we may say with the German proverb : caught to- 
gether, hung together. All the linen in the market counts 
but as one article of conunerce, of which each piece is only 
an aliquot part." ^ 

These explanations are so contradictory of each other, 
and of other statements by the same author, presently to 
be referred to, that they go a considerable way towards 
discounting his theory. 

In Explanation i the " socially necessary labour-time " 
which determines value is stated to be dependent upon 
" the average degree of skill and intensity prevalent at the 
time." In No. 3 it is stated that if the market cannot 
take up all the linen produced, at the " normal " price, i.e. 
the price which covers the socially necessary labour-time, 
" too great a proportion of the total labour of the com- 
munity has been expended in the form of weaving. The 
effect is the same as if each individual weaver had 

^ Capital^ p. 6. ^ Ibid. pp. ii, 12. * Bid, p. 80. 



CHAP. I MARX'S THEORY OF VALUE 6i 

expended more labour-time upon this particular product 
than is socially necessary." 

It is, however, manifest that if it is true that the 
" average degree of intensity prevalent at the time " is the 
** socially necessary labour-time," then the average degree 
of intensity with which linen-weavers work determines the 
"socially necessary labour-time" for the production of 
a given quantity of linen, and the value of the linen is 
determined by this labour -time. Therefore, it is im- 
possible, being a contradiction in terms, that "each 
individual weaver can expend more labour-time upon this 
particular product than is socially necessary." Some 
weavers may expend more labour -time on a given 
quantity of linen than "the average prevalent at the 
time," but all cannot possibly do so. 

If all the weavers increase the labour-time expended 
upon linen, the average of labour-time " prevalent at the 
time " in the linen industry will rise, and, ex hypothesis the 
value of linen must rise. Therefore, it cannot be true, 
that this course would produce the same effect as " if the 
market cannot stomach the whole quantity at the normal 
price of 2s. a yard," for such a contingency would reduce 
the value of linen, a fact which the wording of the quoted 
sentence proves to have been apprehended by Marx. 

If to this reasoning it is objected, that the average 
skill and intensity of which Marx speaks is that prevalent, 
not in a single industry, but throughout all industry, the 
disproof of the objection lies in the following considera- 
tions : — 

If the average labour-time requisite throughout all 
industry determines value, the determinator of value, the 
average labour-time, is of the same magnitude in all 
industries, and, as a necessary consequence, the value of 
the product of all industries must be of the same magnitude, 
i.e. the value of an equal quantity of all products must be 
the same. One yard of cotton-cloth of a given weight must 
then exchange for one yard of any silk-cloth of the same 
weight ; one pound of flour must exchange for one pound of 
meat, for one pound of iron, and for one pound weight of 
alvcr and of gold. This we know not to be the case, and 



62 DEMOCRACY VERSUS SOCIALISM part ii 

if the objection here considered gave true expression to 
the meaning of Marx's theory, the latter might be dis- 
missed at once as too absurd for further consideration. 

Marx himself, however, makes it quite clear that the 
theory embodied in this objection is not held by him ; 
though it must be admitted that his own is only a degree 
less wild. Marx fully recognises that the average labour- 
time requisite in any industry is determined by other 
factors besides the skill and intensity of work put forth by 
the labourers who engage in it, viz. by the appliances and 
natural opportunities at the disposal of the industry, and, 
therefore, he regards the average labour-time requisite 
for the production of any homogeneous product as the 
measure of the value of that product. 

The following quotations bear out this statement : — 

" The introduction of power-looms into England prob- 
ably reduced by one-half the labour required to weave a 
given quantity of yarn into cloth. The hand -loom 
weavers, as a matter of fact, continued to require the 
same time as before ; but for all that the product of one 
hour of their labour represented after the change only 
half an hour's social labour, and consequently fell to one- 
half its former value." ^ 

And further : — 

" Diamonds are of very rare occurrence on the earth's 
surface, and hence their discovery costs on an average a 
great deal of labour-time. . . . With richer mines, the 
same quantity of labour would embody itself in more 
diamonds, and their value would fall." ^ 

These statements clearly prove that in Marx's opinion 
the value of any product is determined by the average 
labour-time socially necessary in the production of that 
product, and not by the average labour-time requisite in 
all production. Therefore, the value of linen is determined 
by the average labour-time requisite in its production. If 
that labour-time increases in quantity, by the habitual 
slowness or want of skill of all linen weavers, the result, 
therefore, must be a rise in the price of linen, and not a 
fall as he asserts in Statement 3. 

1 Capital, p. 6. « Ibid, p. 7. 



CHAP. I MARX'S THEORY OF VALUE 63 

It is difficult to escape the conclusion that the whole of 
Statement 3 was framed with a view of avoiding the obvious 
objection to the labour-time theory of value, 9iat the price 
of nearly all articles in large demand varies independently 
of any variation in the labour-time required for their 
production. 

The contradiction, so far proved, is not the most 
serious one. The statement contained in Explanation 2, 
that skilled labour counts only as " simple " " unskilled " 
labour multiplied, is a still more glaring petitio principii. 

The basis of Marx's theory is that the value of labour- 
power is determined by the cost of its production, i.e. by 
the labour-time requisite to produce the means of sub- 
sistence of the labourer and his family. " The value of 
labour-power is the value of the means of subsistence 
necessary for the maintenance of the labourer." ^ 

If this be true, the value of the labour-power of a 
skilled labourer is determined in the same manner. It 
may be that, in general, skilled labour requires more 
education and a better standard of living than ordinary 
labour. But it is certainly not true that on an average 
the " necessary " cost of maintenance of labour increases 
pari passu with its skill. Therefore the labour -time 
theory of value is upon the horns of this dilemma. 
Either the value of skilled labour is determined like that 
of all labour *' by the value of the means of subsistence 
necessary for the maintenance of the labourer," in which 
case " a given quantity of skilled labour " is not " con- 
sidered equal to a greater quantity of simple labour," for 
this idea involves that of proportion ; or this latter state- 
ment is true, in which case it is untrue that the value of 
all labour-power is " the value of the means of subsistence 
necessary for the maintenance of the labourer." 

If, of the two horns, the latter is chosen, the whole of 
the Marxian theory of surplus value resolves itself into an 
idle dream, for it is based upon the foundation that all 
labour -power is purchased at sustenance cost by the 
capitalist and sold by him at product value. If the first 
horn is chosen, Marx's value theory falls to the ground, 

^ Capital, p. 149. For fuller quotation see Part I. chap. i. 



64 DEMOCRACY VERSUS SOCIALISM part ii 

for it is then admitted that other elements than average 
labour -time, socially necessary, enter into the value of 
products. 

Moreover, this conversion of skilled into unskilled 
labour-time is a still more obvious juggle than the one 
previously pointed out, and is similarly devised in order to 
escape from another inevitable objection to the labour- 
time theory. Goods produced by skilled labour generally 
possess a greater value, and frequently possess an infinitely 
greater value than those produced by ordinary labour in 
the same time. A sketch produced by an artist in one 
hour may, to take an extreme case, possess a hundred 
times the value of the work done by a house -painter 
during an equal time. The recognition of this fact is 
sufficient to completely disprove the theory that "the 
value of any article is determined by the labour -time 
socially necessary for its production." Therefore, this 
transmutation of skilled into unskilled labour had to be 
devised in spite of its incongruity with the general 
character of the labour-time theory in order to mask the 
facts which disprove this theory. 

The trick is the same as that involved in the following 
dialogue : — 

A. All coats have the same price. 

B. That cannot be so ; I saw some coats to-day, and 
found great differences of price. One actually had a 
price four times as high as that of the cheapest among 
them. 

A. That is, because the more highly priced coats count 
as less expensive coats multiplied. In the case you 
mention the most expensive coat counts as four cheaper 
coats. Therefore your objection has no weight ; it 
remains true that all coats have the same price. 

These incongruities throw considerable doubt upon 
the theory of value according to labour-time. If now, 
instead of dissecting the statements of its author, the 
theory is subjected to the test of deduction, if it is 
compared with the facts which it is intended to explain, 
the doubt is converted into certainty. For it is then 
found to be contradicted by the vast majority of the 



CHAP. I MARX'S THEORY OF VALUE 65 

phenomena of value. Grouping these into classes, they 
are — 

Land, patents, copyrights, and other monopolies 
which possess value, though no labour has been expended 
in their production. It will be obvious that the element 
which is altogether absent in one class of values cannot be 
the universal determining factor of all Values. 

Scarce goods of all kinds, which either cannot be 
reproduced or the reproduction of which is limited, such 
as old editions, coins, statues, pictures, rare wines, etc., 
possess a value which cannot be brought into harmony 
with labour-time. 

The products of all skilled labour possess a value 
which, as already pointed out, cannot be reduced to the 
labour-time involved in their production. 

The products of the mining and agricultural industries, 
such as coal, copper, pig-iron, lead, tin, gold, silver, wheat, 
cotton, wool, and many others, differ widely in the labour- 
time necessary for the production of the several quantities 
of each of them. While some land used for wheat-growing 
will only yield 8 or 9 bushels per acre in average seasons, 
other land yields to the same or a little more labour-time 
25 and 30 bushels. In the mining industry the differences 
are even greater. Yet all the wheat, or iron, or any other 
of these products has for the same quantity and quality, 
and in the same market, the same value. If this value, 
say of wheat, were determined by the average labour-time 
socially necessary to produce wheat, all those who produce 
wheat on less productive land, and therefore spend more 
than the average labour-time in the production of a given 
quantity, would be at a permanent disadvantage, and those 
who produce wheat on or near the marginal land, i,e. the 
least productive in use, would be heavy losers year after year. 

It is manifestly unthinkable that the farmers who 
produce this wheat would or could persevere in this 
disastrous course year after year. In the Australian 
colonies, at any rate, they are not large capitalists, and 
would in two or three years find themselves in the bank- 
ruptcy court. 

The fact is, that unless the value of wheat over an 



66 DEMOCRACY VERSUS SOCIALISM part ii 

average of seasons is high enough to compensate for the 
labour-time necessary to produce wheat at the margin of 
cultivation, i.e. on the least productive land used, wheat 
cultivation on such land is abandoned. The same fact 
can be observed in all extractive industries, and is equally 
true, though less easily proved, of all other industries. 
The value of goods must therefore, on the whole, be equal 
to or come near to the greatest amount, and not to the 
average amount, of labour -time socially necessary to 
produce the total quantity of such goods which the 
market requires. 

Not only all the products of the extractive industries, 
but also most of the manufactures, into the composition of 
which these largely enter, are subject to frequent changes 
in value, without any alteration in the average labour-time 
socially necessary for their production. Changes in the 
value of agricultural products, dependent upon climatic 
influences, may occasionally be consistent with increase or 
reduction in labour-time, owing to more or less favourable 
harvests. Apart from these, however, the market registers 
daily, weekly, and monthly changes in the value of such 
products, which cannot be connected with any such 
cause. Variations in the value of mineral products and 
their derivatives, which are of frequent occurrence, also 
cannot be due to any such cause. It is doubtful whether, 
in the course of these frequent variations, the value of 
such goods ever approaches that which would be congruous 
with the average labour-time socially necessary for their 
production, arid it is obvious that, generally, there can be 
no such congruity. 

The same phenomenon may be observed with regard 
to all goods liable to sudden increases or reductions of 
demand, i.e. fashionable goods. 

Protective duties as well as revenue duties generally 
increase the price of the goods to which they apply with- 
out the least increase in the labour-time necessary for their 
production. This not only holds good with regard to 
the goods on which the duty has been paid, but also with 
regard to similar goods, locally produced, on which no 
such duty has been paid. 



CHAP. I MARX'S THEORY OF VALUE 67 

The value of all goods which for their production 
require lengthy processes generally exceeds the value of 
those which require shorter processes, though the average 
labour-time involved is the same or less. The differences 
in the value of new and old wines, and the value of old and 
useful trees, suggest themselves as convenient examples of 
this fact. 

These facts, embracing almost all the phenomena of 
value, prove that, while some goods may occasionally 
possess a value equal to the average labour-time socially 
necessary for their production, such correspondence is an 
accident instead of being the rule with regard to all values. 
A theory which predicates, as a fact universally true of all 
related phenomena, a relation which is generally absent 
from all of them, and which only occasionally may exist 
with regard to some, possesses no element of validity. 
Whether the Marxian theory of value is examined with 
r^ard to the congruity of its various parts ; or whether it 
is examined with regard to its congruity with the phen- 
omena of value which it is intended to relate and explain, 
the result is the same. Both methods show it to be a 
hypothesis ill-considered and untenable. 

This truth is now admitted by a considerable body of 
socialists.^ But not only is Marx's theory still generally 
accepted as true by the vast majority of socialists ; not 
only do those who reject the theory nevertheless counte- 
nance its being taught to the great body of their followers,^ 
but all socialists retain their belief in deductions which 
Marx made from this theory, and for which it seems to be 
the necessary basis. Nay, it is even maintained that 

^ ** English socialists are by no means blind worshippers of Karl Marx. Whilst 
recognising his valuable services to economic history, and as a stirrer of men's minds, a 
large number of English socialist economists reject his special contributions to pure 
economics. His theory of value meets with little support in English economic circles, 
where that of Jevons is becoming increasingly dominant.*^ — Socialism in England, by 
Sidney Webb, pp. 84, 85. 

' " The theory of value has a different history. Like the rainbow theory, it began 
by being simple enough for the most unsophisticated audience, and ended by becoming 
so subtle that its popularisation is out of the question, especially as the old theory is 
helped by the sentiments of approbation it excites ; whereas the scientific theory is 
mtblessly indifferent to the moral sense. The result is that the old theory is the only 
one available for general use among socialists. It has accordingly been adopted by them 
in the form (as far as that form is popularly intelligible) laid down in the first volume of 
Karl Marx's Capital.^' — ** The Illusions of Socialism," by Bernard Shaw, in Fortcast cj 
tk€ Comimg Century y p. 164. 



68 DEMOCRACY VERSUS SOCIALISM part ii 

Jevons's utterly divergent theory still more fully sustains 
these deductions.^ For all these reasons, and in spite of 
its repudiation by the Fabian socialists, a detailed refuta- 
tion of Marx's theory of value was necessary ; and for the 
same reasons, as well as in order to clear the way for 
subsequent refutations of other economic theories of 
Socialism, it is advisable now to enter upon an exposition 
of the law of value accepted as true by those socialists 
who repudiate the Marxian theory and by economists 
generally. I refer to Jevons's quantitative theory of value 
as developed and extended by the Austrian school ot 
economists. 

^ " Possibly if Jevons had foreseen that his theory would make Socialism economically 
irrefutable . . . his scientific integrity might also have gone by the board." — Socialism in 
England, by Sidney Webb, p. io6. 



CriAPTER II 

THE QUANTITATIVE THEORY OF VALUE 

Jevons's theory of value takes human desire as its starting- 
point. Commodities possess value because they can satisfy 
some want or desire of man, i.e. because they possess 
utility. The desire for any commodity may, however, be 
so fuUy met by an increase of supply, that the desire 
becomes extinguished ; while, on the other hand, a reduction 
in the supply of some commodities, if large enough, may 
cause the desire for them to become irresistible. "We 
may state as a general law that the degree of utility varies 
widi the quantity of commodity, and ultimately decreases 
as that quantity increases." ^ 

The several portions of the same stock of a commodity, 
therefore, possess different degrees of utility. As, how- 
ever, any two equal quantities of the same commodity are 
interchangeable, either will be taken with absolute in- 
difference by any purchaser. Hence no one will give 
more for any equal portion of a stock of a commodity 
than for that portion which possesses the least utility. 
Hence the value of the whole stock of any commodity is 
determined by the utility of its final portion, i.e. by its 
final utility. 

Jevons's exposition of the quantitative theory of value, 
though true as far as it goes, embraces but a limited series 
of the phenomena of value. It has received the necessary 
extension at the hand of the Austrian school of economists, 
whose conclusions are now generally accepted. In the 
following, necessarily much condensed, summary of their 

^ Jevons, Tke TAeory of Political Economy^ 3rd edition, p. 53. 



70 DEMOCRACY VERSUS SOCIAUSM part ii 

teaching I lean largely upon Professor von Bohm-Bawerk's 
profound exposition in The Positive Theory of Capital. 

All human action is prompted by desire and resisted 
by distaste for exertion. In order that a thing may 
be produced, the desire for it must conquer the distaste 
for the exertion which its production necessitates. The 
acquisition of goods through exchange is dominated by 
the same law. In an exchange of, say boots for hats, the 
desire of one party for hats must conquer his reluctance 
to part with boots, and vice versa^ i.e. the thing to be 
acquired must be more ardently desired than the thing to 
be given up on both sides or no exchange can take place. 
But desire and utility are merely two aspects of the same 
relation. Men desire things because they are of some use to 
them, i.e. because they possess utility ; and things are useless, 
i.e. possess no utility, unless they can satisfy some desire. 

Things may, however, be valued from a subjective 
standpoint — that is, for their power to satisfy the owners' 
desire for themselves ; or from an objective standpoint, 
when the desire is for other things which they bring 
through exchange. In either case their value depends 
upon, and is a consequence of the utility of the things. 
Hence it is clear that utility is the cause of both subjective 
or use-value, and of objective or exchange-value. 

Utility and value are not, however, convertible terms, 
for a thing may possess utility without possessing value. 
In order that a useful thing may acquire value, the desire 
for it must be strong enough to provoke action ; and in 
order to do this the thing must be an indispensable con- 
dition of the satisfaction of desire. Water as such is 
capable of quenching thirst. But if I want a cup of water 
from a flowing stream, any particular cupful has no more 
utility than any of the other thousand cupfuls of water 
which every minute are flowing by. I would lose no 
satisfaction by the loss of any particular cup of water. It 
is capable of satisfying my desire, but its possession is 
not an indispensable condition of satisfaction. Therefore, 
water, though useful, possesses no value in this place. 

In a desert, however, where water is scarce, the loss of 
any single cup of water may compel some of my desire for 



cH.ii QUANTITATIVE THEORY OF VALUE 71 

water to go unsatisfied. Where this is the case, every cup- 
ful of water is an indispensable condition of satisfaction, 
and, therefore, water does possess value here. 

It follows : in order that utility shall evolve into value, 
the available quantity of the useful thing must be so limited 
that some desire for it may have to go unsatisfied unless 
the available quantity is increased. 

The value of goods, therefore, is a consequence of 
their utility. Their relative utility was classed by the 
classical school of economists according to the kind of 
desire which they could satisfy. First in the order of 
importance they placed necessaries, next superfluities, and 
last luxuries. Hence they came to the conclusion, adopted 
by Marx, that the use-value and exchange-value of things 
had no necessary connection with each other. For accord- 
ing to this classification the use-value of bread infinitely 
exceeds that of diamonds ; yet the exchange -value of 
diamonds is enormously in excess of that of bread. This, 
however, is a purely academic manner of looking at the 
conduct of men. They do not feel the promptings of 
desire according to this scale. Many a family has stinted 
itself in food in order to keep a carriage ; women con- 
stantly deprive themselves of necessaries in order to save 
money for a new dress or a coveted ornament ; and men 
will deprive themselves of food or go about in old and 
shabby clothes in order to get tobacco, beer, or tuition. 
It, therefore, is not the kind of desire which determines | 
the value of the object of that desire, but the degree of 
desire for that object. 

Any given kind of desire is felt in differing degrees of 
urgency, and may, for a time, be extinguished by satis- 
faction and even by the assurance of satisfaction. To 
come back to the former illustration, the man who has 
drunk enough water and sees more of it flowing by him, 
has no longer any desire for water. Even in a desert, if 
conscious that he has more than suflficient water with him, 
his desire for any particular gallon of this water is small. 
But should he lose so much of it, that the remainder is 
barely suflSicient for the rest of his journey, he will feel a 
more urgent desire for what is left and will value it more 



72 DEMOCRACY VERSUS SOCIALISM partii 

highly. The loss of every additional gallon will increase 
the desire which he feels for, and the value which he sets 
on, the rest. 

Not the kind but the degree or urgency of desire, 
therefore, measures the utility and the value of the desired 
object ; and as goods of the same kind are interchange- 
able, the least urgent degree of desire which can be satisfied 
with the available quantity, i.e. the marginal desire, deter- 
mines the value of the entire available quantity. Or, in 
other words, the value of any commodity in the market is 
determined by the valuation of the marginal buyer, i.e. the 
buyer whose effective desire is least urgent. 

Not only is every kind of desire felt in many differing 
degrees of urgency, but many commodities are capable of 
satisfying several kinds of desire of differing urgency. 

As an illustration,^ take the case of a solitary settler, 
who has just harvested five bags of wheat on which he 
must live till the next harvest. He determines that the 
best use he can make of them is to devote one bag to 
making bread ; one to make puddings and cakes ; one 
to feed poultry for his meals ; one to make into spirit ; 
and having no direct use for the fifth bag, he decides that 
it will be most usefully employed in feeding parrots and 
song-birds which he will catch. What is now the value 
of a bag of wheat to him ? 

There can be no doubt as to his answer, for if he were 
to lose one of the bags, he would obviously discontinue 
the feeding of captured birds, while continuing to use the 
remaining four bags for his more pressing wants as before. 
The use of one bag for feeding birds, therefore, was the 
marginal utility of his whole stock of wheat. What he 
lost, when he lost one bag, was this former marginal 
utility, and this utility determined the value of this one 
bag of wheat. 

The assumption, however, is that the five bags of wheat 
are all of exactly the same weight and quality, therefore 
interchangeable. It is, therefore, a matter of indifference 
to the settler, which of the five bags is lost, i.e. they are 

^ Free rendering of example in A Positive TAeory of Capital^ by Prof, von Bbhm- 
Bawerk. 



cH.ii QUANTITATIVE THEORY OF VALUE 73 

all of the same value to him. Hence the value of one bag 
bdng determined by the least urgent desire which the whole 
quantity enables to be satisfied, and the value of all bags 
being alike, it follows that this same desire — the marginal 
utility — determines the value of all five bags of wheat. 

If now another bag were lost, the settler would dis- 
<:ontinue making spirits, i.e. the marginal utility of four 
bags of wheat would have been determined by this, the 
highest use to which the fourth bag of wheat could be 
put, and this use would have determined the value of all 
the bags. If another bag were lost, the settler would dis- 
continue the feeding of poultry ; and if still another were 
lost, that of making cakes and puddings. Being then 
reduced to one bag, none of the less urgent wants can 
be satisfied ; to lose this last bag would mean death. 
Marginal utility and highiest utility have become one, and, 
to the settler, the value of this remaining one bag is im- 
measurably high. 

Suppose now that a hawker penetrates the wilderness 
and offers to exchange some of his wares for wheat. If 
the settler have five bags, he will part with one at a com- 
paratively low rate ; for in parting with it he loses only 
the satisfaction of feeding birds. If his stock consists of 
-only four bags, he will demand a higher rate for any one 
of them, because he loses a higher satisfaction in parting 
with it. If he had only one bag, he would not part with 
it at any price. 

The motives which determine the valuation of goods 
by this solitary settler also determine their valuation in 
the largest industrial community. Other things being 
«qual, increase of supply reduces value and decrease of 
supply increases value — that is, when the available quantity 
of any commodity increases, lower levels of desire must be 
appealed to than before ; these being less urgent will not 
become active unless the sacrifice imposed through their 
satisfaction is reduced, i.e. until the price falls. The value 
thus imposed by the least urgent desire determines the 
value of the whole stock. If supply decreases, less urgent 
desires cannot be satisfied, and a more urgent desire, form- 
ing the marginal of economic employment, produces a 



74 DEMOCRACY VERSUS SOCIALISM partii 

higher value for the whole stock. If, however, the avail- 
able quantity of any commodity is so large, that all possible 
desires for it can be satisfied without absorbing the whole 
quantity, the marginal utility of the whole of it is zero, and 
the value of it is nothing. 

So far it has been shown that the value of goods arises 
from their utility, and is determined by their marginal 
utility. It now becomes necessary to consider a class of 
goods which cannot directly satisfy any desire, but which 
assists in the production of such desired goods, i.e. pro- 
ductive goods, or, in the phraseology of Socialism, " means 
of production." Whence do these derive their value? 
The answer is that their value also is determined by the 
marginal utility of the stock of consumption-goods which 
forms their final product. 

The end and purpose of all production is the satisfac- 
tion of human desire through consumption. Therefore, 
every material, instrument, and opportunity of production 
from the land downwards is, economically speaking, under- 
going the process of being converted into consumption- 
goods. Take a concrete case, say, that of bread. Let us 
call it a commodity of first rank. Its existence depends 
upon that of commodities of second rank, viz. flour, oven, 
and upon the labour of the baker. The existence of these 
again depends upon a group of commodities of third rank, 
viz. wheat, mill, materials 6f oven, and upon the labour of 
producing them. They are again conditioned by a group 
of fourth rank, viz. agricultural implements, building 
material of mill, by land, and by labour. With the ex- 
ception of bread, none of these things are desired for them- 
selves, for none can directly satisfy any desire. Each of 
them, however, does satisfy desire indirectly, through their 
final product, bread. Each one of these groups of pro- 
duction-goods is, economically speaking, bread in the 
making ; is valued only in so far as it assists in the 
ultimate satisfaction of the desire for bread. Their only 
contact with desire is through bread, and their value, 
therefore, is determined by the value of bread. As the 
value of bread itself is determined by the quantitative 
relation between the wants for bread and the supply of breads 



CH. II QUANTITATIVE THEORY OF VALUE 75 

i.e. by the marginal utility of bread, the same condition 
determines the value of each group of the productive goods 
which is called into existence by the wants for bread. 

In the modern co-operative system of industry, it is, 
of course, impossible for all intermediate producers to 
know the value of the final product. But each group of 
productive goods has an intermediate product, and finds 
its value in that of its intermediate product. Thus, 
reverting to our previous illustration, the value of bread 
directly determines the value of the group of commodities 
of second rank ; the value of flour, their intermediate 
product, determines that of the group of commodities of 
third rank ; and the value of wheat determines that of the 
group of fourth rank, of which it is the intermediate pro- 
duct ; and all this, because the value of wheat and flour 
depends upon the marginal utility of bread as much as the 
value of bread itself. " Though the conduction of value 
from the anticipated final product back to intermediate 
product, and from that back to the very first product of 
all, may remdn hidden from each producer, the organisa- 
tion of industry practically carries the information from 
stage to stage." ^ 

It will thus be seen that this theory derives the cost 
of production from the marginal value of the final pro- 
duct, instead of deriving the value of the product from 
the cost of production. However paradosdcal this con- 
ception may seem when compared with surface appear- 
ances, it is nevertheless borne out by common experience. 
No cost of production can give value to a thing the desire 
for which has ceased ; if goods are out of fashion, i.e. if 
the desire for them has lessened, they fall in value regard- 
less of their cost of production. Merchants and retailers 
whose shelves are encumbered with " dead stock " know 
this to their cost. 

Common experience, however, suggests, that if the 
cost of producing an article of general consumption falls, 
such as iron, steel, wool, or cotton, there will sooner or 
later be a corresponding fall in its value. The fact is true, 
but the compelling force does not arise from the lessened 

^ Smart, Introduction. 



76 DEMOCRACY VERSUS SOCIALISM part ii 

cost of production. The producers are not anxious to 
lower the price as long as they can dispose of all their 
products. If they could combine to prevent an increase 
in supply, they could prevent, as in protectionist countries 
they have frequently reduced, the fall in value. When, 
however, such a fall in the cost of production takes place, 
the supply generally does increase, either through the 
desire of previous producers to reap the increased profit 
from a greater number of sales ; or through the desire of 
capitalists to share in the exceptionally high profit, by 
joining in the production of the article in question ; or 
from both these causes. As a consequence, the wants 
which previously were fully supplied cannot absorb the 
additional supply ; lower levels of wants must be appealed 
to, and can only be induced to take up the new supply if 
it can be obtained with a smaller sacrifice, i.e. at less cost. 
But as all parts of the whole stock are interchangeable, no 
one will give more for any of them than the marginal 
buyers offer for the new supply. Hence the value im- 
posed upon this new supply by the new and lower wants 
to which it appeals, fixes the value of the whole supply, 
and not its cost of production, and the marginal cost of 
production must assimilate itself to this new value. 

Similarly, if the desire for a commodity declines, the 
cost of production will tend to assimilate itself to the 
lower value. Marginal producers, i.e. those who produce 
at the highest cost of production, and who find the new 
value unprofitable, will curtail and eventually abandon 
production. A lower cost of production thus forms the 
margin, while the lessened supply may and ultimately will 
produce a higher marginal utility, either preventing a 
further fall in value or raising value again. From both 
ends, therefore, tendencies arise which assimilate the cost of 
production to the new marginal utility of the product. It 
is not the cost of production, but the anticipated value of 
the product, which is the dynamic force and determines 
I the course of industry. For cost of production, that is 
the sum of exertions, merely acts as a brake ; the active 
cause of all economic actions is consumption, the satis- 
j faction of human desires, the well-being of man. 



CHAPTER III 

ORIGIN AND NATURE OF CAPITAL 

Socialism posits private ownership of capital as the cause 
of all or nearly all social injustice. Capital and capitalism 
are the terms most frequently encountered in its literature, 
and they are the favoured objects of denunciation. It 
might, therefore, be supposed that the Socialism which 
claims to be "scientific" had made a close and serious 
study of the thing capital — that it had analysed it and 
clearly conceived what it is. Yet, strange to say, the 
opposite is the case. The endless mass of socialist litera- 
ture which overburdens the student contains but few 
attempts at any definition of capital, and not one serious 
attempt to determine its nature and functions. Not one 
makes any distinction between capital, which is the result 
of labour applied to natural objects, and monopolies, 
which are the creation of legislative enactments ; and, 
though land and capital are frequently difFerentiated, such 
difference is not infrequently denied, either directly^ or 
indirectly.* The few definitions of capital to be found in 
socialist literature all suffer from the same fault. The 
most important of these is that of Karl Marx, who 

^ ^ When we consider what U usually called capital, we are at a loss to disentangle it 
from land, as we are to find land which does not partake of the attributes of capital." — 
Fabian Tract No. 7, Capital and Land, 

' ** I know that it has been sometimes said by socialists : * Let us allow the manu- 
fisctnrer to keep his mill and the Duke of Argyle to keep his land, as long as they do 
not ate them for exploitation by letting them out to others on condition of receiving a 
part of the wealth created by these others. . . .' Unluckily there are no unappropriated 
acres and factory sites in England sufficiently advantageous to be used as efficient substi- 
tutes for those upon which private property has fastened." — Fabian Essays, pp. 139, 140. 

ThtPitieio frincipii^ substituting "factory sites " in the second sentence for "mills " 
in the first, is a sleight-of-hand, characteristic of the manner in which prominent 
soctalists endeavour to obscure the land question. 



78 DEMOCRACY VERSUS SOCIALISM partii 

devotes a chapter of Capital to its elucidation,^ and from 
which the following statements are extracted : — 

" The circulation of commodities is the starting-point 
of capital. The production of commodities, their circula- 
tion, and that more developed form of their circulation 
called commerce, these form the historical groundwork 
from which it rises. ... 

" As a matter of history, capital, as opposed to landed 
property, invariably takes the form at first of money ; it 
appears as moneyed wealth, as the capital of the merchant 
and the usurer. But we have no need to refer to the 
origin of capital in order to discover that the first form of 
appearance of capital is money. We can see it daily 
under our very eyes. All new capital, to commence with, 
comes on the stage, that is, on the market, whether for 
commodities, labour or money, even in our days, in the 
shape of money that by a definite process has to be trans- 
formed into capital." 

This process of transformation is thus described : — 

" The simplest form of the circulation of commodities 
is C — M — C, the transformation of commodities into 
money, and the change of the money back again into 
commodities, or selling in order to buy. But alongside 
of this form we find another specifically different form : 
M — C — M, the transformation of money into com- 
modities, and the change of commodities back again into 
money, or buying in order to sell. Money that circu- 
lates in the latter manner is thereby transformed into, 
becomes capital, and is already potentially capital. . . . 

"In the circulation C — M — C, the money is in the 
end converted into a commodity, that serves as a use- 
value ; it is spent once for all. In the inverted form 
M — C — M, on the contrary, the buyer lays out money in 
order that, as a seller, he may recover money. By the 
purchase of his commodity he throws money into circula- 
tion, in order to withdraw it again by the sale of the same 
commodity. He lets the money go, but only with the 
sly intention of getting it back again. The money, there- 
fore, is not spent, it is merely advanced. . . . 

^ Tk* General Formula fir Capital, voL i. Part II. chap. iv. 



<:h. Ill ORIGIN AND NATURE OF CAPITAL 79 

"The circuit C — M — C starts with one commodity 
and finishes with another. Consumption, the satisfaction 
of wants, in one word, use-value, is its end and aim. The 
circuit M — C — M, on the contrary, commences with 
money and ends with money. Its leading motive, and 
the goal that tracts it, is, therefore, mere exchange- 
value. . . . 

"To exchange ;^ioo for cotton, and then this cotton 
again for ;^ioo, is merely a roundabout way of exchang- 
ing money for money, the same for the same, and appears 
an operation just as purposeless as it is absurd. One 
sum of money is distinguished from another only by its 
amount. The character and tendency of the process 
M — C — M is, therefore, not due to any qualitative differ- 
ence between its extremes, both being money, but solely 
to their quantitative difference. More money is with- 
drawn from circulation at the finish than was thrown into 
it at the start. The cotton that was bought for ^ 1 00 is 
perhaps resold for ^100 plus ;Cio or >^iio. The exact 
form of this process is therefore M — C — M', where 
M' = M^ — M= the original sum advanced plus an in- 
crement. This increment or excess over the original 
value I call surplus-value. The value originally advanced^ 
therefore^ not only remains intact while in circulation^ hut 
adds to itself a surplus-value or expands itself. It is this 
movement that converts it into capital, . . . 

"As the conscious representative of this movement, 
the possessor of money becomes a capitalist. . . . 

" It (value) differentiates itself as original-value from 
itself as surplus-value, as the father differentiates himself 
from himself qua the son, yet both are one and of one 
age ; for only by the surplus-value of £10 does the ^^loo 
originally advanced become capital: . . . M — M', money 
wluch begets money — such is the description of capital 
from the mouths of its first interpreters, the mercantilists. 

" Buying in order to sell, or more accurately, buying 
in order to sell dearer, M — C — M' . . . is therefore in 
reality the general formula of capital as it appears prima 
facie within the sphere of circulation.*' ^ 

1 The italics are ours. 



8o DEMOCRACY VERSUS SOCIALISM partii 

Apart from such misconceptions as the one that all 
capital makes its first appearance in the form of money, 
which do not concern us here, the foregoing quotations 
make quite clear Marx's conception of capital, viz. that 
it consists of all valuable things which yield an income to 
their possessors, and that it excludes all such things which 
either permanently or temporarily yield no income. The 
italicised sentences leave no shadow of doubt as to this 
meaning. No distinction is, therefore, made by him 
between the use of money (to adhere to his term) in 
directions which, while yielding an income to its possessor, 
add to the general income of the social body, and between 
the use of money which yields to its possessor an income 
which is deducted from the general income of the social 
body. 

Moreover, the tenor of the argument implies that 
all incomes from capital are uncompensated deductions 
from the general income, that " buying in order to sell," 
inclusive of the transactions of manufacturers who buy, 
say cotton in order to sell yarn, is an activity which 
renders no service whatever. That this view is fully held 
and deliberately enforced by Marx is not only shown in 
the development of his surplus-value theory, but also in 
the following reference to capital : — 

" We know that the means of production and subsist- 
ence, while they remain the property of the immediate 
producer, are not capital. They become capital only 
under circumstances in which they serve, at the same 
time, as means of exploitation and subjection of the 
labourer." ^ 

Here Marx still pursues the same theory, though the 
change in expression makes its meaning more clear. The 
only characteristic which differentiates capital from general 
wealth is its use as a " means of exploitation and subjec- 
tion of the labourer." Anything not so used is not 
capital, and any income derived from capital is therefore 
" exploited " from the labourer. 

Apart from the confirmation of the deductions made 
from previous quotations, which this passage yields, it 

* Capital^ p. 792. 



cH.iii ORIGIN AND NATURE OF CAPITAL 8i 

leads to curious results in another direction. For, if true, 
any machine or other instrument of production which for 
the time being is not used, or is used by an immediate 
producer, say a farmer, is not capital. If the farmer 
engages a workman to drive the engine it becomes capital. 
A cotton-mill worked by a Co-operative Society could 
not be capital ; if worked by a private employer it might 
be capital, provided it returned a profit ; but if worked at 
a loss it could not possibly be capital. For, obviously, 
neither in the co-operative mill nor in that worked at a 
loss, are ** the means of production used as the means of 
exploitation and subjection of the labourer," while in the 
private mill, returning a profit, they may be so used. As 
reasonably may it be held that a gun is not a firearm if it 
is used for shooting game, but if it is used for shooting a 
man, then it becomes a firearm. 

The foregoing examination proves that Marx made 
no attempt to find out what capital is, but that he framed 
his definitions to suit certain deductions which he desired 
to make from them. 

La Proprietiy by Paul Lafargue, furnishes (p. 303) 
another definition, viz.: — 

"Under capital one understands all property which 
aflbrds interest, rent, income, or profits." 

Lafargue also, therefore, makes no distinction what- 
ever between land, labour-products, and monopoly-rights, 
but classes them all as capital. But subsequently he limits 
this generalisation as follows : — 

** A sum of money put at interest is capital ; any 
instrument of labour (land, weaving-looms, metal works, 
ships, etc.) used not by its proprietor, but by salaried 
persons, is capital. But the land which is cultivated by 
its peasant-owner with the aid of his family, the poacher's 
gun, the fisherman's boat . . . although they are property, 
are not capital." 

This, however, is not merely a limitation, but an 
absolute contradiction of the principal proposition. For 
if "all property which affords . . . income or profits" 
is capital, then the peasant-proprietor's land and the fisher- 
man's boat also are capital, if they " afford an income or 



82 DEMOCRACY VERSUS SOCIALISM partii 

profit " to their owners when used by them, which gener- 
ally is the case. 

Moreover, according to this limitation, land is not 
capital if the owner and, say, two sons work it ; but 
should one of the three be injured, so that a hired man 
must be engaged to take his place ; or should threatening 
weather at harvest-time compel the engagement of an 
additional worker so as to hasten the operation, then it 
would at once become capital and the proprietor a 
capitalist. 

Laurence Gronlund, in The Co-operative Commonwealth^ 
gives the following definitions, pp. 29, 30 : — 

" We, therefore, mean by capital that part of wealth 
which yields its possessors an income without work." . . . 
" Capital is accumulated fleecings, accumulated, withheld 
wages." 

This view is supported by a greater authority, 
Frederick Engel, who, in Socialism^ Utopian and Scientific^ 
p. 43, states . — 

" The appropriation of unpaid labour is the basis of 
the capitalist mode of production, and of the exploita- 
tion of workers that occurs under it ; even if the capitalist 
buys the labour-power of his labourer at its full value as 
a commodity on the market, he yet extracts more value 
from it than he paid for ; and in the ultimate analysis 
this surplus-value forms those sums of value, from which 
are heaped up the constantly increasing masses of capital 
in the hands of the possessing classes." 

These definite statements embody most clearly the 
general conception which socialist writers and teachers \^sh to 
convey, viz. that capital, privately owned, not merely robs 
the workers, but is itself stolen from them, and that any 
property which yields an income without work is capital. 
It cannot be denied that socialists, as well as any one else, 
have a perfect right to define the terms they use as seems 
good to them, provided the definition is consistent within 
itself, and is not subsequently departed from. Whether 
the definition is useful, or whether it tends to obscure the 
facts under consideration, is, however, another question. 
The definitions before us embrace objects, the origin. 



CH. Ill ORIGIN AND NATURE OF CAPITAL 83 

nature, and influence of which difi^er so widely from each 
other, that their agglomeration under one definition has 
consequences of the most misleading and mischievous char- 
acter. The present chapter will be devoted to the eluci- 
dation of what, in contradistinction to monopoly-rights and 
other spurious forms of capital, may be called real capital, 
leaving the treatment of the former as well as of land to 
subsequent chapters. 

All the useful things which constitute wealth are the 
result of human exertion exercised upon matter in the 
direction of changing its form or relation so as to fit 
it for the satisfaction of human desires. But not all such 
exertion adds to the stock of wealth. Apart from all 
other cases, it is obvious that labour directed towards the 
immediate satisfaction of desire fails to do so. For if a 
man gathering berries puts them into his mouth and eats 
them, there is no production of wealth ; but if instead he 
puts them into a basket for subsequent use, the stock of 
wealth is increased. In order, therefore, that such a simple 
form of wealth as berries should be produced, some labour 
had to be expended in advance on the production of 
something not wanted for its own sake, and unable of 
itself to satisfy desire. 

Take another case. A man, wanting water from a 
spring at some distance from his hut, may satisfy his 
desire by going there and raising the water in his bent 
hand till he has quenched his thirst. But if he takes a 
{nece of wood, hollows it out with fire, and attaches a 
handle made of twisted reeds, he not only can obtain more 
water, but can carry it to his hut where it is wanted. 
Manifestly, however, in order to obtain this greater 
quantity of water, and in order to carry it where it was 
wanted, he had to proceed in a roundabout way — that is, 
he had first to make something for which he had no 
cUrect desire, a pail. If he now wants more water still, 
he may cut down a tree, saw it into boards, make these 
boards into a flume, and along this channel an infinitely 
greater amount of water will be carried to his hut by 
gravitation, i.e. without any further exertion on his part 
than that of occasionally keeping the flume in order. 



84 DEMOCRACY VERSUS SOCIAUSM partii 

To obtain this greater supply with less labour, he had, 
however, to go about the work of producing the water in 
a still more roundabout way. He had to quarry iron-ore 
and flux, construct a smelter, smelt the ore into iron, 
then produce a forge and shape the iron into axe and 
saw, then fell a tree, saw it into boards, and finally make 
these into a flume. 

It is true, that if one man had to do all this in order 
to obtain water for his own use, the greater quantity of 
water thus obtained would not requite him for the labour 
expended in his roundabout process. But if thousands of 
men work in co-operation extending over time and space, 
some quarrying ore and flux and coal ; some constructing 
smelters and forges ; others smelting the iron, which 
others again shape into axes, saws, and other appliances 
wanted in various industries ; if other men, again, fell trees, 
and still others saw them into boards for the manifold 
purposes for which boards are wanted, then the man 
wanting boards for a flume can obtain them through 
exchange with such a small expenditure of labour, that the 
construction of a flume may be very profitable to him. 
It is also obvious that the greater supply of water which 
he will now obtain is entirely due to the roundabout and 
co-operative process of producing the water, which began 
with the mining of the ore, which was carried on by 
several exchanges of intermediary products, and closed 
with the exchange of boards for something produced by 
the labour of their consumer. 

The above case is illustrative of the fact that a greater 
result is obtained by the roundabout process of production 
than by the direct process. In by far the greater number 
of productive processes, however, the roundabout process is 
the only one possible. In the pastoral industry, whether the 
final product aimed at is meat, wool, or milk, it is obvious 
that no product can be obtained except indirectly. Animals 
must be bred and reared ; in cold climates shelter must 
be built for them ; fodder must be grown, and various 
other processes must be performed, before either meat 
wool, or milk is produced. Similarly, before wheat or 
any other product of agriculture is obtainable, some sort 



CH, III ORIGIN AND NATURE OF CAPITAL 85 

of agricultural implements must be constructed, land 
must be cleared and prepared, seed must be sown, and 
other processes performed before the harvest can be 
gather^. 

In every kind of manufacture the roundabout process 
is equally obligatory. In the manufacture of bread from 
wheat, some sort of a flour-mill and some kind of an oven 
must be made before the final process of baking the bread 
<:an be undertaken. 

Similarly, before hides will emerge in the shape of 
boots, many tools must be constructed and processes 
undertaken ; and even the most primitive manufacture 
of clothing requires at least a spinning-wheel and some 
sort of a loom, involving the antecedent labour of their 
construction. 

The absolute necessity of this roundabout process is, 
however, still more apparent in the higher branches of 
manufacture. If any one will think out for himself the 
manifold processes required before a steel pen, a watch, a 
pocket-knife, or a pair of spectacles make their appearance, 
he will find that the extension in time and space of the 
co-operative, roundabout process involved, is as far-reach- 
ing as it is indispensable. 

We have now arrived at these conclusions : — 

In some processes of production, the intermediary 
production of goods not in themselves capable of satisfying 
desire, leads to a greater production of the desired goods 
with the same exertion, or to an equal production of them 
with less exertion. 

In by far the greater number of productive processes, 
the intermediary production of goods not in themselves 
capable of satisfying desire is the indispensable condition 
or the production of the desired goods. 

This roundabout process of production, whether 
merely advantageous or indispensable, requires the co- 
operation of many producers through exchange ; not 
only through the exchange of the final product, but 
through the exchange of many intermediate products as 
well. 

Two further conclusions, however, must be drawn. 



86 DEMOCRACY VERSUS SOCIALISM partii 

It was seen that when a man substituted a pail for his 
hand, the produce of his labour was increased through the 
extension of the process of production in time. When 
for the pail he substituted a flume, there was a further 
increase, but at the expense of still greater delay between 
the initiation of the productive process and the appearance 
of the product. This holds true throughout all produc- 
tion. The more roundabout the process, that is, the 
more goods not in themselves desirable are interposed 
between raw matter and final product, the more energies 
and powers of matter are set to work for man's satisfac- 
tion, and the greater is the result of his exertion. 

And further : The more roundabout the process of 
production, the more specialised becomes every part of it. 
With this greater specialisation there comes an increase in 
the forms and quantities of intermediary products, and 
consequently a greater number of exchanges. Not only 
does the co-operative, roundabout process depend upon 
exchanges for its existence, but as it is extended, so 
exchanges multiply. Moreover, the process of production 
is not completed till the ultimate exchange of the final 
product has taken place, i.e. till it is in the hands of 
consumers. The end and purpose of all production being 
the satisfaction of human desires through consumption, 
production only ends where consumption, the satisfaction 
of desire, begins. And just as coal cannot satisfy human 
desires till it is brought to the pit's mouth by the labour 
of the miner, so if it is not wanted there, it still fails to 
satisfy desire till the coal-merchant and sailor, or other 
carriers, have brought it to a city, and till the retailer and 
carter have delivered it in somebody's backyard who 
wants to burn it. From beginning to end of the round- 
about, co-operative process of production, exchange is 
thus its indispensable condition. It is the bond which 
gives aim and purpose to the separate and individual 
efibrts of all the co-operators. 

The foregoing examination has made clear the nature 
of capital. It consists of all those forms of wealth which 
are produced, not for the direct satisfaction of the desires 
of the producer, but for their indirect satisfaction, through 



CH. Ill ORIGIN AND NATURE OF CAPITAL 87 

the assistance which they render in the satisfaction of 
desire, either as material, instruments, or final product ; 
till, when the productive process is completed by delivery 
of the final product to its ultimate consumer, this final 
product loses the special character of capital and becomes 
simply wealth. Capital is thus seen to consist of labour- 
products, and it must be obvious that to press under the 
same description privileges, rights, and possessions, which 
arc not the produce of labour, because their possession 
entails some consequences akin to those which arise from 
the possession of capital, is as misleading as to class 
canaries amongst herbivorae because they like to nibble 
lettuce leaves. 

It is similarly made clear that what differentiates 
capital from other wealth is not its use " as means of 
exploitation and subjection of the labourer," but the 
relation in which it stands to ultimate human desires, and 
that this relation is not aflfected by the question whether 
the thing is " the property of the immediate producer " 
or of anybody else, whether it is actually used, or whether, 
for the time, it remains unused. 

Capital, like all wealth, is the produce of labour and 
land. If capital is " accumulated fleecings," i.e. if it is 
stolen from labour, then all wealth not owned by labourers 
is equally stolen. That no one can morally obtain wealth 
without rendering services in return is absolutely true. 
But it is not true that no one can morally obtain wealth 
without producing it. Doctors, lawyers, scientists, publi- 
cists, and journalists, even socialist ones, no more produce 
wealth than do singers or actors. But they render services 
to the wealth -makers, for which the latter are willing 
to exchange wealth. The socialist denunciation of the 
capitalist as a robber, because as a capitalist — apart from 
organiser or manager — he does not produce wealth, is, 
therefore, illogical. The question is not whether he 
produces wealth, but whether he renders services to the 
wealth-makers which entitle him morally to a share in 
the wealth produced. Here, again, the distinction — un- 
recognised by Socialism — between the capitalist and the 
monopolist is of the utmost importance. The monopolist, 



88 DEMOCRACY VERSUS SOCIALISM partii 

as such, renders no service ; the capitalist, as such, does, 
as will be shown in the chapter on interest. That, as long 
as monopolies exist, the reward which capitalists, as well 
as employers, obtain for their services may, in the aggre- 
gate, be excessive, is true. This, however, is not neces- 
sarily an inevitable outcome of the private ownership of 
capital and the private conduct of non-privileged indus- 
tries, but may be, and, as will be shown, is a secondary 
result of legalised monopoly. Even if this were not the 
case, it would not justify the assertion that all the earnings 
of capital are stolen from labour. Nor does the un- 
doubted fact that a considerable part of existing capital 
consists of accumulated tribute exacted from labour by 
monopolists justify the assertion that " all capital is ac- 
cumulated fleecings," and still less does it justify "the 
exploitation of the labourer " to be made the determinat- 
ing characteristic of capital. 

The denunciations which Socialism directs against the 
capitalistic form of production as " unorganised, chaotic, 
and anarchic," may justify a slight digression in their 
refutation, which the foregoing description of the round- 
about process of production makes almost superfluous. 

Man lives in a world in which nothing is ever at rest. 
Every particle of matter is constantly being acted upon 
by other particles of matter, and is reacting upon yet 
other particles. As the result of these ceaseless activities, 
there appear energies, such as motion, gravitation, heat, 
electricity, chemical actions, and the mysterious principle 
which we call life. The sum of these energies, which 
nature pours out in ceaseless flow and inexhaustible quan- 
tities, without any assistance from man, is the productive 
endowment of man. From it he draws as much as his 
knowledge enables him and his wants necessitate, to assist 
him in satisfying his desires. Where man confines himself 
to production for immediate or almost immediate con- 
sumption, he makes use of a minimum only of nature's 
energies, and, as a consequence, the produce of his labour 
is small ; as he lengthens the process of production, 
enlisting more and more of nature's energies, and at more 
frequent intervals, the produce of his labour increases. 



CH. Ill ORIGIN AND NATURE OF CAPITAL 89 

The increase in product is not necessarily proportioned to 
the increase in the length of the process. On the con- 
trary, after a certain point is passed, every additional 
stage interposed between the beginning and end of a 
productive process may give a somewhat less increase of 
return than the previous one. There is, however, always 
an increase, against which advantage must be placed the 
disadvantage of increase of time. 

It follows that a community which adopts the round- 
about or capitalistic form of production, thereby enor- 
mously and progressively increases its power to satisfy 
wants ; and further, that such a community consumes 
each year but a small part of the fruits of the labour of 
that year, i.e. that it mainly lives on the labour-results of 
past years which mature during the present year, while 
directing the greater part of its present efforts towards 
results which will mature in future years. The longer 
the process of production, the greater will be the degree 
of capitalism, the further off will be the time of maturity 
of present efforts, and the more ample will be their reward. 
In this sense, therefore, capital is the symptom as well as 
the cause of profitable production ; it exists, because a 
people, producing more profitably, can postpone to later 
dates the consumption of the fruits of present efforts. 
The natural agencies imprisoned in capital and com- 
manded by it enable man to give part of his labour to 
the imprisonment of more natural agencies which shall do 
his future work. 

This process of roundabout or capitalistic production 
is made possible through the voluntary co-operation of 
'^t numbers of men, extending in time and space, a 
co-operation of their physical as well as of their mental 
powers. Two kinds of co-operation are possible. One 
is the co-operation of many men, who, for the time, 
abandoning most of their mental activities, obey the will 
of one man in their physical exertions, leaving mental 
guidance to the one. This is the compulsory co-operation 
at which Socialism aims. The other is a voluntary co- 
operation, where every man more or less utilises both his 
physical and mental powers in the production of goods, 



90 DEMOCRACY VERSUS SOCIALISM part ii 

which, through the act of exchange, shall satisfy the 
desires of all of them. This is the capitalistic system, 
world-wide in its extension, upon which our civilisation is 
based. While socialistic, i.e. enforced co-operation, tends 
to the repression of the mental energies of most of the 
co-operators, this voluntary co-operation tends to excite 
them, and thus, in its results, no less than in its character, 
far surpasses the former. Capitalistic production, so 
contemptuously called chaotic and anarchic by the men 
who cannot conceive of any co-operation except that 
which is enforced, and of which the lowest savage is 
capable, is, in reality, the most marvellous system of 
co-operation which the human mind can conceive ; a 
voluntary, world-wide co-operation of independent units, 
which alone has enabled mankind to raise itself above a 
state of savagery, which has enormously increased the 
sum of human happiness, and which, when freed from the 
incubus of monopolism which the interference of the State 
has grafted upon it, will lift mankind above want and the 
fear of want into a sphere of as yet unimaginable intel- 
lectual and moral activity. 



CHAPTER IV 

THE ORIGIN AND NATURE OF SPURIOUS CAPITAL AND 
SPURIOUS INTEREST DEBTS AND MONOPOLIES 

Having ascertained the origin and nature of real capital, 
we may now investigate those of spurious capital, which is 
nearly always confounded with it by socialist writers. 
Even those among them who occasionally distinguish 
between capital and monopoly, invariably assert that the 
latter is an inevitable outcome of the private possession 
of capital ; that capitalism must invariably evolve into 
monopoly, and that this evolution cannot be prevented 
except by the socialisation of capital.^ As far, however, 
as the present writer knows, no socialist has ever attempted 
to prove this assertion. The nearest approach to it are 
attempts, such as that made in the second quotation cited, 
to prove that private ownership of the raw material of the 
earth, i.e. land, leads to monopoly, and then presume to 
have proved that capitalism, i.e. the private ownership of 
capital, does so. 

It cannot be denied that monopolies may have their 
origin in legal enactments which are unconnected with the 
private ownership of capital and the private conduct of 
industries, and it may, therefore, be that all, or nearly all, 

^ ^ As sin when it is finished is said to bring forth death, so capitalism when it is 
finished brings forth monopoly. And one might as well quarrel with that plain fact as 
blame thorns because they do not produce grapes, or thistles because they are barren of 
figs.'* — Fabian Essays^ pp. 93, 94. 

^* Granted private property in the raw material out of which wealth is created on a 
huge scale by the new inventions which science has placed in our hands, the ultimate 
efiect must be the destruction of that very freedom which the modem democratic State 
potitfl as its first principle. . . . Thus capitalism is apparently inconsistent with 
democracy as hitherto understood." — IhiJ. p. 98. 



92 DEMOCRACY VERSUS SOCIAUSM part ii 

forms of monopoly owe their existence to this cause. At 
any rate, no honest conclusion as to the connection 
between capitalism and monopoly can be arrived at till all 
monopolies, which obviously exist through special legal 
enactments, are separated from those for which no such 
cause can be discovered. An endeavour to do this forms 
part of this and the following chapter. 

The legal rights, which in some respects simulate 
capital, are either rights of debt or monopolies. Their 
similarity to real capital is, however, confined to the facts 
that, like real capital, they may be exchanged and may 
yield an income to their possessors. In every other 
respect they absolutely differ from real capital. 

A right of debt arises when existing wealth is exchanged 
tor a legal right to demand other wealth at a future date. 
The wealth to which the legal right refers may be in 
existence at the time the exchange takes place, or it may 
come into existence at some future date. But whether 
it already exists or not, the mere engagement of the 
borrower to hand over wealth to the lender at some 
future date does not add to the existing stock of wealth 
or capital. The stock is the same before and after the 
loan is made ; nay, not infrequently, the wealth by which 
the right of debt has been purchased has disappeared 
before the right terminates. To illustrate : A, a manu- 
facturer, sells goods to the value of ;^ioo to B, a whole- 
sale merchant, on credit ; B sells these same goods on 
credit to C, a shopkeeper, for ;^ 1 20 ; C sells these same 
goods on credit to his various customers, the ultimate 
consumers, for ;^i6o. The capital has then disappeared, 
but it is represented by legal rights of debt, aggregating 
no less than £3^0. 

This element is so conspicuous in the greater part of 
all public debts as to approximate the same to monopolies. 
The National Debt of Great Britain is a case in point. 
The wealth originally borrowed has disappeared without 
leaving any material representatives, such as part of the 
wealth borrowed by a railway company finds in the road, 
rolling-stock, and other labour-products on which it was 
expended. All that exists, and all that was originally 



CH. IV SPURIOUS CAPITAL AND INTEREST 93 

purchased by the lenders, is a claim on the labour of the 
people of Great Britain — the right to demand a share in 
the revenue which Government extracts from them by 
taxation. 

Unlike real capital, therefore, rights of debt can render 
no service, can give no assistance in production. The 
capital with which they were purchased may have rendered 
such service in the past ; if it was used productively, its 
representative may be rendering such service in the 
present ; but the right of debt can render no such service 
at any time. It is a mere claim to wealth or capital, and, 
therefore, in its origin and nature so different from capital 
that the application of the same term to both must lead to 
the utmost confusion of thought. 

It is the same with shares and similar documents. 
These are mere certificates of part-ownership in capital or 
legal rights. The share itself has no value apart from the 
capital or legal right to which it refers. .Mere duplication 
of the number of shares, though it may deceive some into 
the belief that the capital which the shares represent has 
been duplicated, has no influence whatever on the amount 
of capital in existence. But because the legal possession 
of the share entitles its holder to part of the income earned 
by the use of the capital or by the exercise of the legal 
right to which it refers, therefore it is confounded with 
capital. 

Legal rights of debt, such as book-debts, promissory 
notes, bills of exchange, bank-notes, treasury bills, deben- 
tures, mortgages, government and municipal bonds, as 
wdl as certificates of part or full ownership, such as shares 
and certificates of title, are, therefore, not real capital. 
It must, however, be admitted that they are inseparable 
fi*om private ownership of capital and wealth, and the 
writer must also provide against the supposition that he 
objects to the existence of such rights. Though they are 
not capital, they, with the sole exception of public debts, 
the creation of which does involve injustice, are legitimate 
complements of the private ownership of wealth. For a 
private debtor has himself received the wealth the purchase 
of which created the obligation, or has voluntarily taken 



94 DEMOCRACY VERSUS SOCIALISM part ii 

upon himself the obligation of the driginal debtor. 
Whereas the wealth paid for public obligations was not 
received by the taxpayers, but, at best, by one generation 
of them ; nor was the wealth, so received, necessarily used 
for the benefit of subsequent generations of taxpayers. 
The moral right of a government to impose on subsequent 
generations the duty of repaying debts incurred by it as 
the representative of one generation is, to say the least, 
doubtful. Its admission in full would justify one genera- 
tion of men in enslaving all future generations by mortgag- 
ing their productive power to the fullest extent, a doctrine 
which carries with it its own refutation. 

The essential character of all monopolies is, that, 
without causing their possessors to be treated as criminals, 
they enable them to exact wealth fi-om others without 
rendering any service in return, or to exact more wealth 
for such service as they do render than the recipients 
could be compelled to yield if free competition prevailed. 
A monopoly, therefore, must be established by law, or the 
law must have failed to efficiently provide against it. 

The principal legalised monopolies existing in civilised 
countries to-day are : — 

The private ownership of the land and of such treasures 
as the land contains. 

The privileged or exclusive use of land for certain 
purposes. 

Legal limitations of competition in certain industries 
and professions. 

The most fundamental of these monopolies is that 
of the land, inclusive of minerals, water-power, and other 
natural agencies. As all socialists admit as much it is 
not necessary to dwell at length on this kind of monopoly 
here, all the more as it will be dealt with exhaustively in 
subsequent chapters. Two phenomena, which are not 
generally understood, ought, however, to be explained 
here. 

In the heart of the city of Melbourne is a block of 
land, which, except that the trees which grew upon it have 
been cut down, is in exactly the same state as when the 
blacks roamed over the site of the future city. No labour 



CH. IV SPURIOUS CAPITAL AND INTEREST 95 

has ever been expended on it ; no wealth has ever been 

created there. Fifty years ago the present owner of the 

land paid ^57 for it to the government ; lately he was 

offered and refused ^60,000 for the same land. What is 

the cause of this increase in the value of this land } It 

is this. When the land was originally sold, Melbourne 

was a village on the outskirts of the wilderness, and no 

one would have given the owner more than £3 ^ year for 

the privilege of using it. Since that time the country has 

been populated, the soil has been subjected to the plough, 

roads and railways, centring upon Melbourne, have opened 

the interior of the country, and as a consequence Melbourne 

has become a great trading centre. The volume of trade 

has enormously increased, and with it has increased the 

demand for such land as gives access to trading facilities. 

Any one wanting a trading location, such as this land 

presents, therefore, is compelled, and can afford, to pay at 

least ^2000 a year for the privilege of using it. The 

owner of this land has taken no part in the activities 

which have resulted in the value which his land now 

possesses. Even if he had he would have done so as a 

worker and not as an owner, and would have earned no 

mwe title to this land-value than any like worker who is 

not a landowner. For reasons which do not concern us 

here the owner of this land has never made use of his 

power to levy a tribute of ^2000 a year upon the industry 

of the Victorian people without rendering them any service 

in return. He has preferred to withhold from his fellow- 

ddzens the privilege of using this specially favourable 

opportunity to produce wealth. But he can exact this 

tribute any time he chooses, and therefore he can sell the 

power to do so, the annual value of the land, for ^60,000. 

This sum of ^60,000 is now considered to be part of the 

wealth of the country. As a matter of fact, it is neither 

wealth nor capital, but the capitalised value of the power 

to levy tribute from labour and capital without rendering 

or having rendered any service in return. 

Moreover, this power of landowners to exact tribute is 
not conferred upon them by any past services of the com- 
munity, but by its present and anticipated future services 



96 DEMOCRACY VERSUS SOCIALISM part ii 

and necessities. The frequently ephemeral gold-fields of 
Australia illustrate one phase of tins feature. As long as 
the field promises well and the population increases, the 
value of land in the vicinity rises, and frequently rises 
enormously. As soon as its disappointing nature is ascer- 
tained, and the exodus of the population has begun, the 
value of the land begins to decline again, and if the field 
is altogether unremunerative, the land declines to its former 
grazing value. 

The concentration of roads and railways upon any 
centre enormously enhances the land-values there. Not> 
however, because they have been built, but because they 
continue to be used. If, acting similarly as Eastern 
despots have acted, a government were to discontinue the 
use of these roads by building sapping lines to another 
centre to which the traffic was directed, land -values in 
the old centre would decline, and would rise in the new 
one. Hence it is clear that land-values are not the result 
of past action, but the capitalised value of the tribute which 
the present and anticipated future action of the community 
enables landowners to impose upon the productive activities 
of the people. 

The value of all land, and not merely of that which is 
withheld from use, is of exactly the same nature. To 
revert to the former illustration, the great majority of the 
owners of Melbourne land have made full use of their 
power to levy tribute. They have either themselves built 
on the land, or have sold to others permission to build 
upon it against payment of ground-rent. Where this has 
been done, wealth and capital, represented by the value of 
the buildings, has been produced, and as presently will be 
shown, the income derived from the letting of the buildings 
is a legitimate return for services rendered. But apart 
from the value of, and income from, such buildings, there 
is in every case a value of, and an income from, the land, 
which can easily be separated from the building value and 
income. This land-value represents nothing but monopoly, 
the right to levy tribute from labour for the privilege of 
using advantages not created by the owner of the land, 
but which are being created by the community of which 



CH. IV SPURIOUS CAPITAL AND INTEREST 97 

his tenants form part as well as himself, if he is not an 
absentee, as frequently is the case. 

This power to levy tribute from building, agricultural, 
and mining land, as well as from land put to other uses, 
becomes capitalised on the basis of the prevailing rate of 
interest, and the capitalised value of the privilege becomes 
the value of the land. Where rent or royalty is paid by 
the users of the land, the difference between the tribute 
and interest, between the land-value and capital, is com- 
paratively obvious. Where, however, the owner himself 
uses the land, and still more, where the land is used by a 
number of part-owners, as, for instance, a mining company 
owning the mine, the distinction is less easily observed. 
Nevertheless it is there. In addition to the income which 
the freehold farmer derives from his labour, he receives 
one which arises from the use of land made more pro- 
ductive by the community in which he lives. This part 
of his income can easily be separated from the rest, and 
forms the basis of the capital value of his land, apart from 
the improvements. Similarly, the monopoly value of a 
mine consists of the capitalised value of the royalty which 
could be obtained for it, and can be easily separated from 
the capital of the company, i.e. mine improvements, ore 
at the pit's mouth, buildings, machinery, or money. 

All these monopoly values, easily separated from real 
capital, are obviously spurious capital. They are not the 
result of past labour, but of legal privilege. Their value 
does not arise, as that of real capital, from services which 
they render in production, but from the power to levy 
toll upon production. Yet socialists generally class these 
monopoly values as capital, and treat the tribute, the 
spurious interest upon which they are based, as of the 
same nature as real interest. 

The second form of legal monopoly consists of the 
privileged or exclusive use of specially valuable land, such 
as is granted to railway, canal, and tramway companies ; 
to the purveyors of gas, water, electric light, pneumatic 
and hydraulic power, and similar undertakings based upon 
l^al privileges. Every such undertaking, in addition to 
the legitimate return for the services which it renders, 

H 



98 DEMOCRACY VERSUS SOCIALISM partii 

possesses the power, in esse or posse^ to levy toU from those 
who avail themselves of their services, and the capitalised 
value of this toll is mistaken for real capital. 

To show the essential nature of the tribute which 
such monopolies may claim, the following illustration will 
serve : — 

Suppose Government were to grant to me the right to 
erect gates at all the points giving entrance to the city of 
London, and to charge one penny to any one who passed 
through these gates. Suppose also that experience had 
shown that, on an average, the annual income from this 
toll was ^500,000. If the prevalent rate of interest were 
4 per cent, the capital value of the privilege would be 
j^ 1 2,500,000. I could sell it for that sum, and whether 
I sold it or not I would be considered to be possessed of a 
capital of j^ 1 2,500,000. As a matter of fact, I would have 
no capital. All I possessed would be this legal privilege 
to levy tribute. 

If now the number of persons desiring to enter the 
city of London were to increase, the income from the 
privilege would increase as well, and with it would rise 
the capital value of it. Nay, the mere expectation that 
such increase of traffic would take place in the future would 
add to the present value of this privilege. 

Every successful undertaking of the kind enumerated 
above possesses, in addition to the value of its capital, some 
monopoly value of the kind above described. 

Consider a railway company. The capital of the under- 
taking consists of the present value of the road — improve- 
ments, plant, buildings, material, etc., less such wear and 
tear as they have undergone. Suppose any one were to 
offisr to buy any English railroad on such a valuation, or 
«ven on the value for which all its capital might be replaced 
now, without deducting anything for wear and tear. The 
directors would certainly regard him as a lunatic. Yet if 
any one offered to buy an ordinary factory of similar age 
on such terms he would be received with open arms. 
Whence then the difference ? It arises from the fact that 
the Legislature has given to the railway company a special 
privilege, i.e. the exclusive use of a narrow strip of land 



CH. IV SPURIOUS CAPITAL AND INTEREST 99 

hundreds of miles long, unbroken by any roads or other 
rights of use. Having the exclusive right of use to this 
land, the railway company can charge more for carrying 
goods and passengers over it than if competing carriers 
were allowed to run trains over it.^ The difference between 
competitive rates and the monopoly rates which the com- 
pany now charges is a toll on industry as much as the toll 
levied at the gates in the preceding illustration. Capital- 
ised, this toU forms part of the value of every railway 
stock. The value of railway shares is thus composed, 
partly of the value of the capital employed in the under- 
taking, and partly of the capitalised value of the legal 
power to levy tribute. 

Some of the American tramway companies lend them- 
selves to a detailed illustration of this feature of monopoly, 
because the facts have been carefuUy ascertained. To take 
only one example. Mr. Lee Meriwether, Commissioner 
of Labour, Missouri, reports as follows with regard to the 
tramways in St. Louis : — 

The amount expended in buildings, inclusive of the 
cost of their site, and in building the lines and equipping 
them, is estimated at $8,415,360. The total capitalisation 
of the lines he states to be $38,437,000, and the dividends 
psud in the preceding year (1804) as $1,962,468. The 
value of the undertaking, therefore, exceeds the value of 
the capital employed by more than $30,000,000. The 
dividend, calculated upon the value of the capital, amounts 
to more than 23 per cent. Obviously, if such a business 
were open to competition, other companies would start, 
and the rates of carriage would be quickly reduced. But 
as the existing companies have been granted the exclusive 
right of using the streets for tramway purposes, no com- 
petition is possible ; and this exclusive privilege, enabling 
the companies to charge monopoly rates, is valued at over 

^ The monopoly resides in the ownership of the road, not in the conduct of the 
traffic. There can be no more objection to allowing any person or company to run 
trains over State lines of railway competing for the traffic than there is to allowing 
jM-ivate traffic for hire on public roads and streets. The difficulties in the way of 
regulating the traffic and ensuring safety are not insuperable, as is shown in those cases 
where competing companies have running powers over the same roads. The advantages 
of inch a system are obvious and great. The same considerations apply to tramways 
md canals. 



loo DEMOCRACY VERSUS SOCIALISM partii 

$30,000,000, and is regarded as capital by socialists just 
as much as the cars and rails and buildings of the com- 
panies. 

Even where the legal right to use the streets is not 
exclusive, but merely privileged — as, for instance, in gas, 
electric light, and similar companies which have been 
accorded the right to lay their mains and cables below 
the public streets — the impossibility of granting the same 
privilege to every member of the community acts as a 
deterrent to competition, and therefore produces monopoly 
values. This tendency is increased through the fact that 
wherever competition is limited combination is feasible. 
The certainty that similar privileges cannot be granted 
indefinitely enables competing companies for the supply of 
gas, water, electricity, and similar commodities, as well as 
competing railway companies, to amalgamate or pool their 
receipts. The limitation of competition arising from 
privileged use thus ultimately results in the elimination 
of all competition, and in the establishment of the same 
monopoly and the creation of the same monopoly charges 
and monopoly values as where the legal privilege is 
exclusive. 

All such legal privileges, therefore, are more or less of 
the nature of toll-gates ; their value is not a sign of the 
existence of any real capital, but consists merely of the 
capitalised value of a tribute which the possession of such 
legal privileges enables their owners to exact from others, 
without rendering service or adequate service in return. 



CHAPTER V 

THE ORIGIN AND NATURE OF SPURIOUS CAPITAL AND 

SPURIOUS INTEREST — Continued 

The third group of monopolies is one to which socialists 
have given special attention, without, however, discovering 
their origin. It consists of monopolies which have been 
formed by the combination of capitalistic undertakings into 
groups, called rings, trusts, syndicates, combines, or pools, 
for the purpose of gaining control over a particular in- 
dustry, and preventmg competition between themselves, 
dther in the purchase of raw material or in the sale of 
finished goods, or both, and in the hire of labour. 
Socialists unanimously regard such combinations as the 
natural and inevitable development of the private owner- 
sMp of capital under modern industrial conditions. They 
look forward to the universal prevalence of such combina- 
tions, and regard State monopoly as the only possible 
means of escape from these private monopolies. 

As an illustration of this attitude, the following quota- 
tion from The Fabian Essays will serve : ^ — 

** I now come to treat of the latest forms of capitalism, 
the * ring ' and the * trust,* whereby capitalism cancels its 
own principles, and, as a seller, replaces competition by 
combination. When capitalism buys labour as a com- 
modity it effects the purchase on the competitive principle. 
. . . But when it turns round to face the public as a seller 
it casts the maxims of competition to the wind and pre- 
sents itself as a solid combination. . . . The competing 
persons or firms agree to form a close combination to keep 

* Pp. 89, 90, and 93. 



I02 DEMOCRACY VERSUS SOCIAUSM partii 

up prices, to augment profits, to eliminate useless labour, 
to diminish risk, and to control the output. . . . Com- 
bination is absorbing commerce. . . . The individualist 
... is naturally surprised at these rings which upset all 
his crude economic notions, and he, very illogically, asks 
for legislation to prevent the natural and inevitable result 
of the premises with which he starts. It is amusing to note 
that those who advocate what they call self-reliance and 
self-help are the first to call on the State to interfere with 
the natural result of that self-helpy of that private enterprise y 
when it has overstepped a purely arbitrary limit." ^ 

If the writer of the above statement were right in his 
assumption that such combinations as he deals with are 
the natural and inevitable result of private enterprise, his 
ridicule of individualists who call for legislation to combat 
them might be justified. If, however, such combinations 
owe their existence in almost every instance to legislative 
interference with private enterprise, then the individualist 
who calls for the removal of such legislative interference is 
by no means ridiculous. That this is the case will be seen 
from the following examination. Before entering upon it, 
it may, however, be of interest to show that socialists 
frequently reveal that they are not without some suspicion 
that this may be the case. The writer of the above- 
quoted statement, for instance, not only selects nearly all 
his examples of rings and trusts from the United States, 
but actually makes the following admissions : — 

" The best examples of * rings * and * pools ' are to be 
found in America,*' and "We must again travel to 
America to learn what the so-called * trust * is." ^ 

Still more definite is the following admission, taken from 
Hobson's Evolution of Modem Capitalism : * — 

" In most of the successful manufacturing trusts some 
natural economy of easy access to the best raw material, 
special facilities of transport, the possession of some State 
or municipal monopoly of market are added to the normal 
advantages of large-scale production. The artificial 
barriers in the shape of tariff, by which foreign competition 
has been eliminated from many leading manufactures in the 

^ The italics are ourt. ' Fabian Essays^ pp. 90, 94. ' P. 141. 



CH. V SPURIOUS CAPITAL AND INTEREST 103 

United States, have greatly facilitated the successful opera- 
tion of trusts.** 

Any examination of the facts fully bears out this state- 
ment, i.e. that all, or nearly all, successful pools, rings, 
trusts, syndicates, or whatever other denomination be 
adopted by monopolistic combinations, owe their success 
to the possession of some legal privilege — either the pos- 
session of exceptionally productive land, or power over 
routes of transportation, or other legislative exclusion of 
free competition, or to a combination of such causes. So 
largely is this the case that, even with regard to the few 
instances in which the existence of such favouring causes 
cannot be proved, the presumption of their existence is 
very strong. 

Legal limitations of competition in industries which, 
not depending on special privileges, are by their nature 
competitive, have been favoured devices of despotic rulers, 
as well as of those interested in such industries, for their 
own enrichment at the expense of the masses of the people. 
The privileges of mediaeval trade-guilds, the monopolies 
established by Tudor and Stuart kings, the mercantile 
system, and last, not least, its modern offspring, the pro- 
tective system, all have used and use the same device with 
the same object, i.e. to enable certain producers to charge 
higher prices for their products than they could compel 
buyers to pay under the action of free competition. 

The protective system renders this service to manu- 
facturers within the protected area by placing duties on 
competing foreign goods from which simUar goods made 
within such area are exempt. Foreign goods being thus 
artificially increased in price, the competing home manu- 
facturers can either raise the price of their own goods to 
the same level, in which case little or no exclusion of 
foreign goods takes place ; or they can raise the price of 
their goods to a level a little below that of the foreign 
goods plus the duty, when the competing foreign goods 
will be excluded, while at the same time a higher price for 
locally-made goods is obtained. The large and exceptional 
profit of such protected manufacturers, however, speedily 
attracts rivals into the protected area, and, as a conse- 



I04 DEMOCRACY VERSUS SOCIALISM partii 

quence, the limited requirements within the area are either 
overtaken, or threatened to be overtaken. This over- 
production would speedily reduce prices and deprive 
manufacturers of the exceptional profits, the promise of 
which protection held out to them. The protective 
system, however, supplies the remedy in the facility for 
combination which it offers. Foreign competition being 
excluded as long as the price is kept a little below that of 
foreign goods plus the duty, the number of manufecturers 
who need combine for the purpose of avoiding competi- 
tion is comparatively small, and is favoured by proximity 
of location. To take one trade as an example. It is 
obviously impossible for all the cotton-spinners of the 
world to agree with regard to the quantity of yarn which 
they will produce and the prices which they will charge. 
But it is much more feasible for the cotton-spinners of one 
country to do so, especially when the exceptionally high 
prices which they obtain in their home market enable them 
to sell any surplus in outside markets without any profit, 
or even at a loss. Protection, therefore, not only restricts 
competition directly, but it also oflFers seductive facilities 
and temptations for such combinations in further restriction 
or abolition of competition as are known as combines, 
pools, rings, trusts, and syndicates. 

While protection thus enables local manufacturers to 
combine, and to do so with such profit to themselves, that 
it is worth their while to undertake the trouble, and even 
risk, where such action has been made illegal, free trade 
tends to prevent such combinations. In free-trade countries 
prices are governed by international competition, and no 
combination can raise local prices by more than a fraction 
— equal to cost of freight — over those ruling in the world's 
markets, unless it included all, or nearly all, the world's 
producers.^ The advantages therefore, even where local 
combinations are feasible, are too small to induce the 
trouble and risk of forming them, unless they are favoured 

^ ** In the great majority of cases there is only a very narrow margin between the 
price at which English manufacturers can produce a commodity and the price at which 
it can be produced abroad, so that a comparatively small rise in price will afford to the 
foreign manu&cturer the coveted opportunity of acquiring a new market.*' — ^J. Stephen 
Jeans, Trusts^ Pools, and Corners^ p. 30. 



CH. V SPURIOUS CAPITAL AND INTEREST 105 

by some other legal privilege. Hence the comparative 
rarity of such industrial combinations in free-trade Great 
Britain, and their prevalence in industrial countries which 
have adopted a protective policy. Thus, once more 
quoting from Mr. J. Stephen Jeans's valuable work. 
Trusts^ Pools y and Corners : — 

" The iron manufacturers of Germany regularly adopt 
two sets of prices. The tariff, by protecting them from 
outside competition, enables them to quote a high range of 
prices — ^which are often regulated by combination — to 
home consumers, while they dispose of a large surplus at a 
lower range of prices in neutral markets, where they have 
to face the competition of other countries." ^ 

Similarly, Professor Hadley states : ^ — 

" Nearly every industry in the United States employing 
fixed capital on a large scale has its pool, whether they call 
it by that name or not." 

Von Halle, in Trusts in the United States^ furnishes a 
table comprising no less than 501 separate combinations, 
rings, and trusts, embracing almost every product of in- 
dustry, and states : — 

"The Sugar Trust, it is alleged, arbitrarily dictates 
prices on its purchases, and, with the aid of the tariff, sells 
at prices which yield a greater profit to the refiner than 
could be obtained under free competition. This was 
admitted by Mr. Havemeyer (President of the Trust) 
before the investigation committee of the United States 
Senate, 15th June 1894."* 

The same result has followed from the protective 
tariffs of European countries. The Forum of May 1899 
publishes an article, "Trusts in Europe," by Wilhelm 
Bcrdrow, which states : " It is in Germany, however, 
of all European countries, that trusts have spread most 
extensively and have been most successful. . . . The 
German and Austrian rolling-mill unions, the trusts of 
the chemical industries, as well as the most important 
French trusts — the latter embracing more particularly the 

' p. 177. 

2 **On Trusts in the United States, ** in Economic Journal^ March 1892, p. 73. 

» P. 69. 



io6 DEMOCRACY VERSUS SOCIALISM partii 

iron, petroleum, and sugar industries — have all adopted 
the method of selling conjointly by means of a central 
bureau, in order to dictate prices and to deprive the 
individual members of every vestige of independence. . . . 
As far as England is concerned, it must be admitted^ 
notwithstanding her great industrial activity and her 
competitive warfare not less pronounced than that of 
other states, the trust system has as yet found but tardy 
acceptance in that country. This is doubtless due in 
some degree to the thorough application of the principles 
of free trade ; for it is well known that the largest trusts 
are powerless unless their interests are secured by a pro- 
tective tariff excluding from the home market the products 
of foreign countries." 

Combinations have been so rarely successful in Great 
Britain that, dealing with the recent amalgamation of the 
sewing-cotton factories, the Economist of 4th December 
1897, could say : — 

" This IS the introduction of the American trust system 
into Great Britain. . . . There is a certain consolation, 
however, in the fact that in such a country as ours industrial 
monopolies seldom attain anything like permanent success." 

While protection alone is thus the fruitful parent of 
one set of industrial monopolies, others owe their origin 
to a combination of protection with the ownership of 
mineral lands ; still others to a combination between the 
owners of railways and mineral lands, or indirectly to the 
existence of privately owned railways, canals, and mineral 
lands alone. 

As an example of the former, the anthracite coal pool 
in the United States may be cited.^ Practically all the 
anthracite coal mined in the United States comes from a 
limited area of rich deposits in the state of Pennsylvania. 
This area is intersected by canals and railways, owned by 
three companies, which control about 90 per cent of the 
output through the purchase of this proportion of the 
coal-land. The duty on foreign anthracite coal is 67 

^ See ** Anthracite Mine Labourers,'* by O. O. Virtue, in Bulletin of the Department 
of L^AouTj U.S., Nov. 1897 ; and Jeans, TrustSj Pools, and Corners; and H. D. Lloyd^ 
ff^ealtA against Commonwealth, 



cH.v SPURIOUS CAPITAL AND INTEREST 107 

cents per ton, equal to about 30 per cent ad valorem. 
Being thus secured against foreign competition, and hold- 
ing their local competitors in the hollow of their hand, 
through the ownership of all the routes of transportation, 
the three railway and canal companies, as long as they are 
united, dictate prices for the whole of the output and 
wages for all who seek employment. Though quarrels 
between them have been frequent, each being followed by 
a reduction in the monopoly price of coal, they have only 
been intervals in the general course of exploitation through 
the combination of their interests. 

A more remarkable case, as exhibiting the indirect 
influence of the monopolising tendency of private owner- 
ship of routes of transportation, is the rise and progress 
of the small group of men, which, after monopolising the 
kerosene oil trade of the United States, is now extending 
its supremacy in so many directions as to foreshadow the 
coming of an autocracy over the entire industry of that 
country. This monopoly has been established, and is still 
being maintained by secret, illegal, and immoral contracts 
with the privately owned railways of the United States, 
which not only give lower freights to these favourites than 
to their competitors, but which in various other ways 
utilise the control over these public highways for the 
destruction of the business of the latter. The following 
evidence, of which that furnished by Mr. Henry W. Lloyd 
in his painstaking ^ov)fiyWealth against Commonwealth^ — the 
statements of which are based entirely upon official evidence, 
— is of special interest, will sustain this contention : — 

" He (Mr. Rockefeller) was able to secure special rates 
of transportation with the help of some bribed railroad 
freight-agents." ^ 

" One witness declared that the trust received from the 
railway companies fourth-class rates on quantities of oil in 
less than car-load rates, whereas he had to pay first-class 
rates ; and that he had practically been driven out of 
business in localities covered by certain roads who thus 
favoured the trust.'* ^ 

^ E. von Halle, Truttt m tkt United Start s, p. ii. 
' J. S. Jeant, Trusti, Pods, and Conurs, p. 95. 



io8 DEMOCRACY VERSUS SOCIALISM partii 

"After taking 3700 pages of evidence and sitting 
for months, the committee of 1879 of the New York 
Legislature said in their report : * The history of this 
Corporation (the Standard Oil Trust) is a unique illustra- 
tion of the possible outgrowth of the present system of 
railroad management in giving preferential rates, and also 
showing the colossal proportions to which monopoly can 
grow under the laws of this country. . . . The parties 
whom they have driven to the wall have had ample capital 
and equal ability in the prosecution of their business in all 
things save their ability to acquire facilities for trans- 
portation.' 

" More than any others the wrongs of the oil industry 
provoked the investigations by Congress from 1872 to 
1887, and caused the establishment of the Interstate 
Commerce Commission, and more than any others they 
have claimed the attention of the new law and the new 
court. The cases brought before it cover the oil business 
on practically every road of any importance in the United 
States — in New England, the Middle States, the west, the 
south, the Pacific Coast ; on the great east and west trunk 
roads — the Pennsylvania, the Erie, the Baltimore, and 
Ohio, the New York Central, and all their allied lines; 
on the transcontinental lines — the Union Pacific, the 
Central Pacific, the Southern Pacific ; on the Steamship 
and Railroad Association controlling the south and south- 
west. They show that from ocean to ocean, and from 
the Gulf of St. Lawrence to the Gulf of Mexico, wherever 
the American citizen seeks an opening in this industry he 
finds it, like the deer forests and grouse moors of the old 
country, protected by gamekeepers against him and the 
common herd. 

" The terms in which the commission have described the 
preference given the oil combination are not ambiguous : 

* great diflference in rates,* * unjust discrimination,* * in- 
tentional disregard of rights,* * unexcused,* * a vast dis- 
crepancy,' * enormous,' * illegal,' * excessive,' * extraordinary,* 

* forbidden by the Act to regulate commerce,' * so obvious 
and palpable a discrimination that no discussion of it is 
necessary,* * wholly indefensible,* * patent and provoking 



CH. V SPURIOUS CAPITAL AND INTEREST 109 

discriminations for which no rational excuse is suggested/ 

* obnoxious/ * disparity,' . . . * absurd and inexcusable,' 

* gross disproportions and inequalities,' *long practised,' 
*the most unjust and injurious discrimination . . . and 
this discrimination inured mostly to the benefit of one 
powerful combination.' " ^ 

The control exercised by a few millionaires over the 
meat and cattle trade of the north-western States of the 
Union originates in the same cause. E. von Halle 
states : — 

"The special investigation of the meat and cattle 
trade" (United States Senate Report, No. 829, 51st 
Congress, second session, ist May 1890) "demonstrates 
that heavy pressure on the railroads and ownership of the 
Chicago stockyards on the one hand, * friendly agreements ' 
on the other, had resulted in an effective control of the 
whole market. . . . They fix the prices for the purchase 
of cattle and sales of meat in the markets of Chicago, 
Kansas City, and Omaha." * 

This is confirmed by Henry D. Lloyd : — 

" When a farmer sells a steer, a lamb, or a hog, and 
the housekeeper buys a chop or roast, they enter a market 
which for the whole continent, and for kinds of cattle and 
meats, is controlled by the combination of packers at 
Chicago known as * the Big Four.' This had its origin 
in the * evening ' arrangement, made in 1873 ^7 ^^e rail- 
roads with preferred shippers, on the ostensible ground 
that these shippers could equalise or * even ' the cattle traffic 
of the roads. They received $ 1 5 as * a commission ' on 
every car-load of cattle shipped from the west to New 
York, no matter by whom shipped, whether they shipped 
it or had anything to do with it or not. The commission 
was later reduced to $10. They soon became large 
shippers of cattie ; and with these margins in their favour 
* evening' was not a difficult business. By 1878 the 
dressed beef business had become important. As the 
Evener Combine had concentrated the cattle trade at 
Chicago, the dressed-beef interest necessarily had its home 

^ Henry D. Lloyd, fVea/tA against Commonwealth, pp. 476-478. 
' E. von Halle, Trusts, pp. 2i, 22. 



no DEMOCRACY VERSUS SOCIALISM partii 

at the same place. It is a curious fact that the Evener 
Combine ceased about the time the dressed-beef interest 
began its phenomenal career. The committee appointed 
by the United States Senate to investigate the condition 
of the meat and cattle markets found that under the 
influence of the combination the price of cattle had gone 
down heavily. For instance, in January 1884 ^^ best 
grade of beef cattle sold at Chicago for $7. 1 5 per hundred 
pounds, and in January 1889 for $5.40; north-western 
range and Texas cattle sold in January 1884 ^^ $5-6 o, and 
in January 1889 at $3.75 ; Texas and Indian cattle sold in 
1884 at S4.75, ^^^ price declining to $2.50 in December 
1889. These are the highest Chicago prices for the 
months named. 

" * So far has the centralising process continued that 
for all practical purposes,* the report says, *the market 
of that city dominates absolutely the price of beef cattle 
in the whole country. Kansas City, St. Louis, Omaha, 
Cincinnati, and Pittsburg are subsidiary to the Chicago 
market, and their prices are regulated and fixed by the 
great market on the lake.' 

"As to the effect on retailers, local butchers, and 
consumers, it was admitted by the biggest of *the Big 
Four,' * that they combined to fix the price of beef to the 
purchaser and consumer, so as to keep up the cost in their 
own interest.' 

"The favouritism on the highways, in which this 
power had its origin in 1873, ^^^ continued throughout 
to be its mainstay. The railroads give rates to the 
dressed-beef men which they refuse to shippers of cattle, 
even though they ship by the train load — * an unjust and 
indefensible discrimination by the railroads against the 
shipper of live cattle.' The report says : * This is the 
spirit and controlling idea of the great monopolies which 
dominate the country ... no one factor has been more 
potent and active in effecting an entire revolution in the 
methods of marketing the meat supply of the United 
States than the railway transportation.' " ^ 

Similar preferential treatment on the part of railway 

^ Henry D. Lloyd, H^ealtk agabut CammonwtaltJ^ pp. 33-36. 



J 



CH. V SPURIOUS CAPITAL AND INTEREST 1 1 1 

companies has been instrumental in creating many other 
monopolies which apparently have no such causal connec- 
tion with railway monopolies, notably that of some English 
and American express companies. 

Still another series of monopolies owes its origin and 
existence to the ownership of patents and copyrights, as is 
the case with the Western Union Telegraph Company, the 
Bell Telephone Company, the School Book Trust, and 
many others. 

The manner in which the semblance of capital is given 
to these monopoly rights is stated as follows : ^ — 

" It is said to be customary for the preferred stock in all 
American stock-companies to represent the money, value 
of land, plant, materials, products, etc., whilst the common 
stock at the beginning represents goodwill, rights, etc., to 
which by and by accumulated profits add a more tangible 
basis." 

The magnitude of this process of converting monopoly 
rights into spurious capital, generally known as " water- 
ing stock," is illustrated by the same investigator as 
follows : ^ — 

"From 45.2 per cent in 1891, the actual value of the 
property " (of the Cotton Oil Trust), " it rose to 48 per 
cent in 1892, 50 per cent in 1893, 50.8 per cent of the 
capitalisation in 1894. From this we may conclude that 
. . . the actual value of the undertaking, minus the 
goodwill, was not much more than from one-fourth to 
one -fifth of the capital stock. This agrees with the 
testimony of Mr. John Scott before the New York State 
Committee in 1888." 

The latest available balance-sheet of the " American 
Tobacco Company," published in Bradstreets of 14th May 
1898, exposes an even greater discrepancy between real 
and spurious capital. This company, with the assistance 
mainly of the tariff, but, to some slight extent, with the 
help of some patents, controls the cigarette trade of the 
United States, and is now underselling the makers of plug 
tobacco with a view of forcing them into a combination 
with itself. In the course of 1897 it lost $1,000,000 

^ E. von HtUe, Trust l, p. 107. > Ibid, p. 106. 



112 DEMOCRACY VERSUS SOCIALISM partii 

in this endeavour. Nevertheless, the net profit on all its 
transactions during this year was $4,179,460, on a capital 
composed of $4,009,000, representing real estate, plant, 
and machinery, and of $24,876,000, representing monopoly 
rights, such as patents, trade-marks, and goodwll. There 
is also a reserve fund, accumulated out of past profits not 
divided, amounting to $10,900,000.* 

^ While this book was twaiting publication, two articles, respectively entitled ** The 
Rage for Trusts " and " The Trend of Trusts," appeared in The Public, a weekly journal 
published in Chicago. They are from the pen of the editor of the journal, Mr. Louis 
F. Post, an accomplished economist, and are so instructive that the present author 
sought and received permission to republish them in combined form. They are re* 
produced accordingly as Appendix VII. 



CHAPTER VI 

A COMPARISON OF REAL WITH SPURIOUS CAPITAL 

The examinations conducted in the two preceding chapters 
prove that industrial monopolies are not an inevitable out- 
come of the private ownership and control of industrial 
undertakings, as Socialism posits, but that they, in nearly all 
instances, arise from special privileges granted by the State. 
Therefore, no such far-reaching and disastrous remedy as 
that which Socialism provides is required for their abolition. 
Owing their existence to special privileges, the withdrawal 
of these privileges will terminate their existence. They are 
the creatures of the unjust interference of the State with 
the equal rights of its citizens. Not further interference, 
as Socialism demands, but the abolition of such interference 
is, therefore, required to terminate their existence. 

The further demonstration, furnished by the preceding 
examination, is, that these monopoly-rights simulate the 
appearance of capital, and that the tribute which they 
exact largely simulates that of interest ; as also, that these 
must be carefully distinguished from real capital and real 
interest, if a true conception is to be formed of the 
influence upon the distribution of wealth which the private 
ownership of real capital and of unprivileged industrial 
undertakings exercises. 

This distinction between real and spurious capital, 
between material products of human labour applied to 
land, and the immaterial products of legal enactments, 
must, however, be carried one step further. 

All products of labour are destined to be consumed 
either in the direct satisfaction of human desires, as wealth. 



114 DEMOCRACY VERSUS SOCIALISM partii 

or in their indirect satisfaction, as capital ; either in one 
act, as food, or in a series of acts extending over shorter 
or longer periods, as clothing, furniture, tools, machines, 
buildings, and others. The object aimed at in the pro- 
duction of all such things is the satisfaction of human 
wants, and the only way to achieve this object is by their 
destruction through consumption. Even if this object 
fails to be achieved, these products of human labour 
nevertheless disappear sooner or later. Either they are 
lost, as in shipwrecks, or destroyed in accidents, as in 
fires, or they gradually disappear under the influence of 
mechanical decay and chemical disintegration. 

The products of human labour which retain their 
character of wealth for the longest period are gold, silver, 
and precious stones. It may be that among the stores of 
precious metals and jewels now existing, there is some 
portion which has been of service to man from the very 
dawn of history. Yet even these long-lived products of 
labour differ only in degree and not in kind from all 
other forms of real wealth. For even gold, silver, and 
precious stones tend to disappear again as soon as they are 
produced : jewels by being lost or spoiled ; precious metals 
by being consumed in the arts, or through wear and tear 
when passing from hand to hand as money, or when used 
as ornaments, or through being lost. 

All wealth and capital, therefore, being the product of 
human labour, has, like man himself, a temporary exist- 
ence only, and the stock of it, existing at any time, is far 
smaller than is generally supposed. Were the continuous 
processes of production to cease, even for one year, not 
only would the vast majority of men die of starvation, but 
there would be an unimaginable scarcity of all the more 
permanent forms of wealth and capital as well. Mankind 
lives mainly from hand to mouth. The wealth existing 
at any time is mainly the product of the labour of a few 
preceding years, and though some forms of wealth may 
continue to exist for comparatively long periods, as some 
buildings, statues, pictures, and others, not only are these 
rare exceptions, but it is only through the constant appli- 
cation of more labour that their life is thus prolonged. 



CH. VI REAL AND SPURIOUS CAPITAL 1 1 5 

Real capital, in common with all labour-products, is 
subject to this consumption, decay, and destruction. 
Legal enactments, however, are not subject to these 
influences. Unless they are repealed by another act of 
the Legislature they exist as long as the nation exists ; and 
as long as they rem^n in force, every . monopoly-right 
which they create continues to exist as well. There is 
to-day in Great Britain scarcely any wealth, and certainly 
no form of capital, which dates back to the Norman 
G)nquest ; but the monopoly of the land of Great Britain, 
then initiated, has continued to exist and has been extended 
and intensified. Many secondary monopoly-rights also, 
created centuries ago, continue to exist at the present 
time, of which the New River Company, which levies 
tribute upon a large section of the inhabitants of London, 
is only a prominent example. 

The creation of new monopoly-rights, to which nearly 
all legislatures devote a considerable part of their time 
and energies, is, therefore, not necessarily counteracted, 
as is the case with real capital, by the disappearance 
of older creations, and, therefore, their mass is steadily 
increasing. 

Moreover, social progress constantly tends to reduce 
the value of real wealth and capital, while it similarly tends 
to increase the value of all monopoly-rights. For social 
progress, consisting of increase in population, advance in 
the arts and sciences, lengthening of processes of pro- 
duction and multiplication of exchanges, tends steadily to 
facilitate and increase the production of all useful things, 
and thus to reduce their value, while it frequently leads 
also to the sudden destruction of value in forms of capital 
which have been rendered obsolete by new inventions and 
discoveries. 

The same cause, however, tends to enormously increase 
the value of land and other monopoly-rights. To revert 
to previous examples, the land of England does not 
materially differ in extent, and does not differ at all in 
character, fi-om what it was at the time of the Conquest. 
Yet the whole of its capital value at the former time 
would be covered over and over again by the tribute 



ii6 DEMOCRACY VERSUS SOCIAUSM partii 

which Englishmen now pay for its use within a single 
year. In the city of Adelaide a piece of land was 
lately sold at a rate which, for lo-feet frontage, ex- 
ceeded the price which the Government received some 
half-century ago for the whole area of that city. The 
same advance in value is conferred by the same cause 
upon secondary monopolies. Depending, like land, for 
their value upon the tribute which they can exact from 
individual consumers of the goods and services to which 
they relate, increase of population adds to the number of 
tributaries which they can exploit, while all progress 
tends to reduce the cost of producing the goods or 
services which they render. Their annual net income, 
and, therefore, their capital value, is thus constantly 
enhanced by social progress. 

The value of all real capital is thus constantly de- 
clining, and all of it has only an ephemeral existence, dis- 
appearing soon after labour has created it, and depending 
upon further labour for its recreation. Monopoly-rights, 
on the contrary, are constantly increasing in value and 
number and have permanent existence. It follows that 
what Socialism terms capital consists in every country to 
by far its largest extent of mere monopoly-rights and to a 
small extent only of real capital. This is true even of 
Great Britain, where protective monopolies have been 
abolished, and is still more true of countries like the 
United States, Germany, and France, where their baneful 
influence has been added to that of other and even more 
far-reaching monopolies. It is, therefore, obvious that 
the diagnosis of the social malady upon which the doctrines 
of Socialism are founded is faulty in the highest degree, 
and that, therefore, the remedy which it proposes cannot 
be the true remedy. Making no distinction between real 
and spurious capital, between what is permanent and 
obviously unjust and injurious, and what is ephemeral and 
has never been proved to be unjust or injurious, it con- 
demns both alike. By combining, under one denomina- 
tion, these two widely differing classes of property, 
socialists obscure the action of both, and have, therefore, 
been unable to see that the relations between labour and 



cH.vi REAL AND SPURIOUS CAPITAL 117 

the owners of real capital are profoundly affected by the 
existence of these monopoly -rights. That the power 
which the capitalist possesses over labour is not due 
to his possession of real capital, but to the weakening 
of the economic position of labour through the baneful 
action of monopoly-rights, will be shown in subsequent 
chapters. 



CHAPTER VII 



SURPLUS-VALUE 



As shown in Part I. chapter i., one of the fundamental 
theories of the economic teaching of Socialism is that of 
surplus-value as set forth in Marx's Capital. Starting 
from the conception that the value of any commodity is 
determined by the average labour-time socially necessary 
for its production — a conception which, as already stated, 
is now repudiated by many Socialists themselves — he arrives 
at the conclusion that the value of labour, i.e. wages, is 
similarly determined by the necessary cost of maintenance 
of the labourer and his family, i.e. the labour -time 
necessary to produce his labour-power. On this founda- 
tion — ^shown to be false in Part II. chapter i. — he erects 
the theory of surplus-value. Shortly stated it runs : 
The average labour-day (labour-power) is largely in ex- 
cess of the time required by the labourer to produce the 
equivalent of his maintenance (labour-value). The excess 
of time spent in labouring produces a surplus-value which, 
being appropriated by the employer, becomes ultimately 
divisible into rent, interest, and profit. Supposing the 
labour-day to number twelve (12) hours, and six hours to be 
sufficient to produce the value required for the labourer's 
maintenance or wages, it follows that the other six hours 
are spent in labouring for the exclusive benefit of the 
capitalist-employer. His gain, the surplus-value, therefore, 
arises from the unpaid appropriation of a part of the labour- 
time of every labourer, i.e. from that part of the value of 
the product of individual labour which exceeds the cost of 
the labourer's maintenance. Surplus-value, therefore, is a 



CHAP. VII SURPLUS^VALUE 1 1 9 

deduction from the product of individual labour, appro- 
priated by the capitalist-employer.^ 

As Marx himself admits that the creation of surplus- 
value, in his theory, is merely an extension beyond a 
certsdn point of the production of value generally,^ the 
demonstration, given in Part II. chapter i., of the errone- 
ous nature of his theory of value destroys the basis on 
which his conception of surplus-value rests. For if the 
value of labour-power is not determined by the con- 
sumption of the labourer and his family, and if the value 
of goods is determined by other factors than the average 
labour-time socially requisite to produce them, then the 
difference between the value of labour-power and labour- 
product does not necessarily arise from the unpaid appro- 
priation by the employer of part of the labour-power. 
The importance of the subject is, however, far too great 
to allow it to rest at this point, and requires a complete 
examination. In this and the following chapters, there- 
fore, an endeavour will be made to show that this entire 
conception of the origin of surplus -value is crude and 
misleading, first by showing that the theory is contradicted 
by facts, secondly, and at greater length, by a careful ex- 
amination of the component parts of surplus-value. 

If the Marxian conception of the origin and nature of 
the tribute which is undoubtedly exacted from labour were 
true, all surplus-value must be a deduction from the pro- 
duct of individual labour. If it can be shown that there 
are cases in which surplus-value arises which can be seen 
by him who runs not to be deducted from the product of 
such labour, the conception must be false. The following 
examples furnish such instances : — 

A jeweller employs five women in sorting and stringing 
pearls. His capital is, say, ^150,000, and fis annual sales 
of strings of pearls amount to ^100,000. His average 
aimual dear profit is, say, ^8000. If this sum represents a 
deduction from the produce of individual labour, it must 
be deducted from the labour-product of the five women 
whom the jeweller employs. Each of them must, there- 

^ For quotations see Book I. chapter i. 
« See quoUtion from Capital, pp. 176, 177, in Part I. chapter i. p. 5. 



I20 DEMOCRACY VERSUS SOCIALISM partii 

fore, be entided to an addition of ^1600 a year to the 
wages which she is actually receiving. 

If, to this reductio ad absurdum^ it is objected, that 
the surplus-value of ^8000 may, as to its greater part, be 
deducted from the product of the labour of the divers and 
other labourers employed in harvesting the pearls from 
the ocean-bed, and transporting them to the jeweller's 
shop, the reply is obvious. These men were not employed 
by the jeweller, but by preceding capitalists, who, accord- 
ing to the supposition, themselves extracted surplus-value 
from the labour of their workmen. The price which the 
jeweller paid for the pearls included this surplus-value, 
just as the price which his customers pay to him includes 
any surplus -value he may receive. The surplus-value 
which he exacts, therefore, is additional to that exacted by 
previous employers, and, if it is a deduction from the 
produce of individual labour, it can only be deducted from 
that of the labour which he has employed, viz. five women. 
Unless, therefore, it is contended that the labour-product 
of each of these five women exceeds ^1600 a year, this 
surplus-value must be admitted to be no deduction from 
the produce of labour. 

The following case is even more decisive. A vigneron 
obtains from his vineyard new wine to the value of £1 00, 
constituting the entire return of the year's harvest. He 
keeps this wine for ten years, at the end of which period, 
and without any labour having been done to it in the 
interval, the wine possesses a value of ^^200. From whose 
labour has this surplus-value of ^100 been deducted ? 
The only labourers who could be victimised are those who 
were employed in attendance on the vines, plucking grapes, 
and making the wine. When their labour ceased, its 
entire produce, inclusive of that of the vigneron* s own 
labour, had a value of ^ 1 00 only. The additional ^^ 1 00 
which makes its appearance subsequent to the cessation of 
their labour, cannot be the product of the latter, and can- 
not, therefore, be a deduction from the product of their 
or any other man's labour.^ 

^ Both examplet are a free rendering of those given in Capital and Interest by von 
Bbhm-Bawerk. 



CHAP. VII SURPLUS-VALUE 1 2 1 

These two examples will suffice to show the erroneous 
nature of the Marxian theory of surplus-value on which 
Socialism is based. A close examination of the phenomenon, 
moreover, shows that surplus-value is a compound of 
many elements, some of which are natural consequences of 
the mental constitution of man and of his physical environ- 
ment, and not in any sense deducted from the product 
of individual labour ; while others, which constitute such 
deductions, are the result of limitations placed on the equal 
freedom of men by legislative enactments which confer 
special privileges on some. Of these latter, monopoly- 
tribute or spurious interest has already been dealt with in 
so far as its origin is concerned. The next few chapters 
will be devoted to the examination of other component 
parts of surplus-value, and to that of the influence which 
each of them exercises upon the earnings of labour. 



CHAPTER VIII 



LAND AND RENT 



The term "land" possesses a double meaning. In its 
narrower sense it applies to the superficial area of the dry 
surface of the earth. In its wider sense it denotes all the 
matter and energies of nature external to man and un- 
altered by his activities, for the reason that man, being a 
land animal, can utilise nature's powers only from the 
dry surface of the globe. Air, rain, and sunshine, the 
elements of fertility contained in the soil, and the mineral 
treasures hidden below the soil ; the various manifestations 
of motion and gravitation, heat and electricity, chemical 
action and life, become accessible to man from this dry 
surface alone ; and though man has made himself master 
of the ocean and may soon obtain the mastery over the 
aerial regions as well, yet from the dry surface of the 
globe alone can he obtain the materials which enable him 
to navigate these alien spaces, and to it must he return, 
from time to time, in order to renew his power of navi- 
gating them. 

This dry, superficial area, therefore, is the medium 
through which all nature becomes accessible to man, and 
as far as his efforts to utilise nature for the satisfaction ot 
his wants are concerned, all nature is included in it. In 
its wider sense, therefore, the term land covers all the 
powers of nature which man may use for the satisfaction 
of his wants ; not merely that which gives him foothold 
and resting-place, but all the matter which he can form 
into wealth and all the energies which assist him in his 
efforts. It is the only source of wealth ; the passive 



CHAP. VIII LAND AND RENT 123 

factor in its production, without the use of which no 
wealth can be made and human beings cannot exist ; the 
indispensable condition of life and of production. 

The general condition through which any and all the 
opportunities for making wealth, the treasures of nature, 
become accessible to man, therefore, is through the use 
of some part of the dry surface of the earth. There is, 
however, another condition equally far-reaching in its 
consequence. 

All material existence, and, therefore, all economic 
activity also is conditioned by space and time. Space and 
time, however, are concepts, not of things, but of the 
relation in which things stand to each other. Space is a 
relation of extension, i.e. of the relative position of things 
which exist simultaneously ; time is a relation of succession, 
ue. of the relative position of things which follow upon 
each other. 

Space, therefore, which has relation to all matter, also 
relates to wealth, which is matter modified by human 
exertion, and to this exertion. Every exertion, every 
form of production, requires space for its accomplishment ; 
space to stand upon ; more space to move in, and still 
more space for the extraction, storage, transformation, and 
transportation of materials, implements, and products. 
Occupations differ as to the space necessary for their most 
efficient conduct, but in every occupation there is a limit 
to the amount of exertion which, within a given space, 
will yield the most profitable return. Hence, natural 
law imposes upon man an extension of his labour in space, 
and this extension is limited by the area of the dry surface 
of the globe. 

This dry surface, however, the land in the narrower 
sense of the term, does not everywhere give access to 
similar opportunities for making wealth. Land differs 
greatly in the elements of fertility which the soil contains, 
as well as in climatic conditions. Some areas give access 
to mineral treasures, while others do not, and even the 
former vary greatly with regard to the quantity and im- 
portance of^ the mineral deposits underlying them. Some 
areas, again, contain waterfalls and other opportunities 



124 DEMOCRACY VERSUS SOCIALISM partii 

which facilitate production ; other areas are covered with 
much coveted timber or luscious grasses, while others, 
again, are arid, bare, or covered with worthless scrub or 
rock. The opportunities for making wealth, the gifts of 
nature to which land gives access, thus vary in infinitesimal 
gradation from what economically may be regarded as 
zero, to what bears the utmost potentiality of wealth. 

There are, however, still further variations in the pro- 
ductivity of land, i.e. in the opportunity which it affords 
to satisfy wants through exertion, which have frequently 
been disregarded, though they are of equal importance 
with those already enumerated. In previous chapters it 
has been pointed out that exchange not only forms part 
and parcel of the productive process, but is the necessary 
condition for the existence of the world-wide co-operative 
system of production which has raised mankind above the 
level of savages. As co-operation through exchange 
supersedes the primitive form of isolated production, the 
qualities of land which offer facilities for exchanges 
assume importance and gradually increase in importance. 
Access to navigable streams, to harbours, lakes, and tide- 
waters ; proximity to fertile lands, mines, natural routes 
of trade, and centres of population ; proximity to artificial 
routes of transportation, as roads, canals, and railways, 
now confer potentialities of productiveness upon land 
which it previously did not possess. 

These variations bring into prominence a consideration 
which otherwise would be of far less importance. As 
between two pieces of land, that one is obviously more 
productive which, to the same exertion, gives a greater 
return. It may, however, be, and frequendy is the case, 
that of two pieces of land of equal productivity when a 
certain amount of exertion is applied to both alike, one 
will be more productive than the other if the amoimt of 
exertion is increased on both of them. To some extent 
this is true even in agriculture. A sandy soil may give 
the same or even a smaller return per unit of labour 
in wheat -growing than an equal area of clayey soil. 
But if both were used for fruit-growing, which requires 
a considerably greater application of labour and 



CHAP. VIII LAND AND RENT 125 

capital per acre, the sandy soil might prove far more 
productive. 

This consideration applies with greater force to 
mineral land. If no more exertion were applied to an 
acre of mineral land than to one of wheat-land, the 
return would probably be increased but little, if at all, and 
might be even less. When, however, a vastly greater 
amount of exertion in labour and capital is applied to the 
mine, such land may not only give a greater aggregate 
return, but may even give a much greater return per unit 
of exertion applied. 

The most important manifestation of this condition, 
however, arises in our great exchanging centres — the manu- 
facturing and trading cities. If no more labour were 
expended on an acre of land in the heart of a great city 
than on an acre of country land used for wheat-growing, 
the return would scarcely be greater. When, however, 
suitable and costly buildings are erected on the former, 
when thousands of workers and large amounts of capital 
are congregated within these buildings, then the produc- 
tivity of such land is enormously greater than that of an 
equal area of country land, not only in the aggregate, but 
generally also per unit of exertion applied. 

So far we have arrived at these conclusions. Land, 
i.e. the dry surface of the globe, differs in its productivity, 
i.e. in the opportunity which it affords for the satisfaction 
of human wants through exertion : ( i ) inasmuch as some 
land yields a greater return than other land to the same 
exertion ; (2) inasmuch as some land yields a greater 
net return than other land when more exertion is con- 
centrated upon it. 

Let us now consider the influence which these facts 
exert upon the distribution of wealth. 

Seeking to satisfy their wants with the least exertion, 
all men will endeavour to obtain the use of such land as, 
according to existing knowledge, will yield the greatest 
return to their exertion. They cannot all be successful in 
this endeavour, because the extent of the most productive 
land is limited, and because, in every occupation, there is a 
limit to the amount of exertion which can be applied most 



126 DEMOCRACY VERSUS SOCIALISM partii 

profitably within a given space. Some men, therefore, 
must use land of less than the greatest productiveness, 
other men must use still less productive land, until at last 
a wide difference in productiveness prevails between the 
most productive and the least productive land in use. So 
far, however, as the knowledge of men enables them to 
determine, the least productive land in use will still be 
more productive than the most productive land not yet 
used, for the reason, that all men seek to satisfy their 
wants with the least exertion. The least productive land 
in use, i.e. the land at the margin of production, must, 
however, fix the standard of the reward for human exer- 
tion, because it is a matter of indifference to any worker, 
whether he receives all the product of his labour when 
using land at the margin of production, or whether he 
receives the same amount when working on land of greater 
productiveness. If, for instance, the entire product of a 
man's exertion at the margin is los. a week, then, other 
things being equal, he will be willing to use the same 
exertion on land yielding 50s. a week, provided he himself 
receives no less than los. a week out of the same. The 
difference is rent, a payment made for the use of better 
natural opportunities than are available to all men. 
Taking from those who use more productive land the 
excess of its productiveness over that of land at the 
margin, rent equalises the natural opportunities for making 
wealth to all men. 

On this consideration is based Ricardo's Law of Rent, 
which runs : " The rent of land is determined by the 
excess of its productivity over that which the same applica- 
tion can secure from the least productive land in use." 
In view of the considerations above advanced, it will be 
seen that the law thus formulated expresses only part of 
the truth. It excludes from consideration the advantages 
which arise from the massing of more exertion on suitable 
land. A true law of rent cannot be so limited, and the 
importance of extending it may be seen from the errone- 
ous deductions to which this limitation has given rise. 
Ricardo, Mill, and their successors were in this way led to 
adopt the Malthusian doctrine, that increase of population, 



CHAP. VIII LAND AND RENT 127 

compelling the use of inferior land, must reduce the 
average productivity of labour, and therefore must tend 
to produce misery and starvation. In the absence of any 
notice of the facts referred to, this was not an unnatural 
conclusion. When, however, these facts are included in 
the survey, the opposite result will be seen to arise. For 
with the increase of population there arises an increase in 
secondary production and exchanges, and these multiply 
at a greater ratio than population. Hence, more and 
more workers can be concentrated on land of the highest 
productivity, that which is most suitable for manufactures 
and exchanges, and where the productivity of the average 
unit of labour is greatest. Not only is the tendency of 
resorting to inferior land thus checked, but as more 
additional labour is employed on land of greatest pro- 
ductivity than is employed on land of inferior productivity, 
the aggregate product of all the labour is increased. 
Instead of increase of population leading to misery and 
starvation, it must, caeteris paribuSy tend to an increase of 
comfort and plenty. 

The distinction previously drawn is therefore of the 
utmost importance, and this consideration may excuse this 
digression from the strict line of argument. A law of 
rent, to be strictly true, must therefore be formulated as 
follows : — 

The rent of any piece of land is determined by the 
excess of its productivity over that of an equal area of the 
least productive land in use, after the sum of exertions 
which in both cases yield the most profitable result has 
been deducted. 

So far land and the rent of land has been dealt with 
under natural conditions — that is, under conditions unin- 
fluenced by men's temporary enactments ; and it will have 
been seen that rent is a natural result of the extension of 
men's labour in space, just as interest will be seen to be a 
natural result of the extension of their labour in time. 
But, just as when dealing with capital, attention had to be 
drawn to a mass of spurious capital and spurious interest, 
the result of mere legal enactments, so attention has now 
to be drawn to a spurious and additional rent, equally 



128 DEMOCRACY VERSUS SOCIALISM partii 

resialting from mere legal enactment, i.e. from the private 
ownership of land and rent. 

In order to make this important point clear, use will 
be made of the following diagram. Tiie horizontal lines 
enclose land of the same productivity, while the per- 
pendicular lines divide all the land into equal areas. The 
assumption, not absolutely true, is that as productivity 
declines area increases, but this assumption in no way 
ialsifies the argument. The figures looo to loo mark 
the original productivity of the land : — 



Degrees of Productivitv 



A 


3 




~ 














B 








900 




C 













Soo 




D 
















700 


E 





















F 




















G 




















H 




















J 




















*i 





















CHAP. VIII LAND AND RENT 129 

As long as social requirements can be satisfied through 
the use or land A alone, there is no rent. As soon as 
any portion of land B must be used, rent arises. All of 
land A now acquires a rental value of 100 units, i.e. equal 
to the excess of its productiveness over what is now the 
marginal land B. When any of the land C has to be 
taken into use, B, in its turn, acquires a rental value of 
100 units, and the rental value of A is correspondingly 
increased, viz. to 200 units. The use of any land of 
lower scale of productiveness gives a rental value to the 
land in the immediately superior scale, and correspondingly 
increases the rent of all the land which previously had any 
rental value. In contradistinction to this general rise of 
rent, there stands the partial rise of rental value which arises 
when additional productiveness is discovered in or con- 
ferred upon particular land. The discovery of new 
mineral deposits ; the discovery of new methods for in- 
creasing the yield, or of treating more profitably, mineral 
deposits previously known ; the discovery of methods, or 
the invention of machines, which increase the yield of 
special kinds of land or of their products ; changes in 
trade routes ; the rise or increase of trading centres ; the 
extension of railways and other routes of communication 
and transportation, — all of these as well as other causes 
increase the value of particular land. In these cases the 
rental value of such land alone rises, without increasing 
the rental value of other land. That is to say, where 
rental value is conferred upon any land through a lower- 
ing of the margin of production, all rents rise correspond- 
ingly ; but where new rental value is caused by advantages 
discovered in or conferred upon particular land, the rise in 
rental value is confined to such land. 

If it is now assumed that if all the land above line G 
were fully used, the products of this land would suffice 
for the requirements of the people, the natural rent would 
be : For land A, 600 units ; for B, 500 units ; for C, 
400 units ; for D, 300 units ; for E, 200 units ; for F, 
I cx) units ; and land G, as well as all the land below it in 
the scale of productivity, would possess no rental value. 
If, however, the owners of the land keep any of the land 

K 



I30 DEMOCRACY VERSUS SOCIALISM part ii 

above line G out of use, say the lots marked o, two 
consequences follow. 

The first is, that in order to satisfy the necessities of 
the community, some labour must be employed on less 
productive land, i.e. on land between G and H, and that, 
as a consequence, the produce of the aggregate labour of 
the community is lessened. 

The second is, that out of this lower product of the 
aggregate labour a largely increased rent-charge must be 
paid. For some land of 300 units of productiveness 
being now used, land above G, of 400 units of pro- 
ductiveness, now acquires an annual rental value of 100 
units, and the rental value of all the land of superior 
productiveness is correspondingly increased. In the case 
illustrated by the diagram the rent received by the owners, 
if all the land above line G had been fully used, would 
have been 1 1,100 units. By keeping out of use the three 
squares marked o, they increase the actual rent-charge to 
14,900 units. This increase, amounting to 3800 units, is 
a spurious rent, as is also the increased rental value of the 
land kept out of use. 

Moreover, where all the land has passed into private 
ownership, the self-interest of owners may, and frequently 
does, induce them to hold so much superior land out of 
use or full use, that some of the least productive land 
must be used unless the population declines. As under 
such conditions land is a complete monopoly, owners do 
not, as a rule, permit the use of any, even of the most 
inferior land, without some payment. As some men will 
now be compelled to use such land in order to live, they 
will be compelled to pay a rent for it. Natural rent is, 
under these conditions, superseded by rack-rent, i.e. rent 
at the margin : the least productive land available having 
no other limit than the smallest reward which labour can 
be compelled to accept, labour on all other land and in all 
occupations must accept similarly depressed wages. The 
rent for all other land, therefore, must rise accordingly, 
and the body of spurious rent which the workers must 
pay to the landowners is increased to enormous propor- 
tions. All this artificial addition to the natural rent is a 



CHAP. VIII LAND AND RENT 131 

real deduction from the natural reward of individual 
labour. 

Nor is it necessary that much land should be kept out 
of use in order to produce this result. All that need be 
done is to devote some considerable areas to inferior uses 
than those they are best fitted for. To do this may, and 
frequently does, confer an additional advantage upon the 
landowners at the expense of the whole community, and 
still further emphasises the conflict between the interests 
of the community and those of private landowners. 
G>nditions, largely prevailing in the Australian colonies 
as well as in other new countries, will serve to illustrate 
this phase of the subject. In every one of these colonies 
millions of acres of the richest agricultural land, with 
ample rainfall and near to markets and ports of shipment, 
are used for mere grazing purposes. As a consequence 
most of the farmers were forced to settle on poorer land, 
further from markets and ports, and where the rainfall is 
less abundant. Land fit only for grazing is thus used for 
agriculture, while the land fittest for agriculture is used 
for grazing only. The latter would, under wheat, have 
given a gross return of say 35s. per acre, while as grazing 
land its gross return is only say 15 s. per acre. Yet the 
net return to the owner may be, and frequently is, greater, 
where the gross return is smaller. For the cost of culti- 
vating the land, i.e. wages, seed, implements, horses, etc., 
may absorb 30s. out of the 35s., while in grazing, where 
scarcely any labour is employed and all other expenses are 
small, these would absorb less than 5s. per acre. In the 
one case, therefore, the net profit would be 5 s. out of a 
gross profit of 35 s. ; in the other it would be los. out of 
a gross profit of 15s., and, in addition, the trouble of 
management will be much smaller. The community, 
however, loses 20s. per acre, the diflference in the gross 
return. For in either case the profit of the community is 
measured by the gross and not by the net return. The 
gross return represents new labour-products added to the 
common stock. Out of this new product the labourers 
employed in producing the materials and implements used 
on the land, as well as those directly employed on it, 



132 DEMOCRACY VERSUS SOCIAUSM partii 

defray their consumption. When the gross product is 
35s., the added wealth is greater by 20s. than when it is 
15s., and as long as the additional consumption does not 
exceed the value of the additional wealth, the permanent 
wellbeing of the community is increased to that extent. 
Hence, though the owner gains 5s. by the substitution of 
the less productive for the more productive process, the 
community loses 20s. worth of wellbeing. In addition, 
there is an enormous loss from the reduced productivity 
of the labour of those farmers who are compelled to 
cultivate land of less fertility and at greater distance from 
markets and ports. An even more graphic illustration of 
this condition is furnished by the wholesale clearances of 
Scottish and Irish land in order to make room for cattle, 
sheep, or deer, and the resulting misery of large numbers 
of the evicted tenants, and of the shopkeepers who supplied 
their wants. 

Still another and far-reaching influence arises from 
private ownership of land. It has been shown that the 
natural function of rent is to equalise the natural oppor- 
tunities available to men. Rent takes from those who 
use the better natural opportunities the excess of produce 
due to this advantage and reduces their earnings to that 
which equal exertion would gain on the least productive 
land in actual use. As no man can be entitled to the free 
use of more productive natural opportunities than other 
men can obtain, no man can be entitled to the surplus of 
produce, due, not to his greater exertion, but to the use 
of the more productive opportunity. Rent, i.e. natural 
rent, therefore, is not a deduction from individual labour- 
results, as many socialists assert. It is a deduction from 
the results of the labour of society as a whole. Just as 
no person is entitled to the free use of more productive 
natural opportunities, so no person can ethically be com- 
pelled to the uncompensated use of less productive oppor- 
tunities. All men are entitled to the free use of average 
opportunities to labour. Those* using opportunities more 
productive than the average, therefore, are morally bound 
to compensate those using opportunities of less pro- 
ductiveness than the average. The equalising mission of 



CHAP. VIII LAND AND RENT 133 

rent, therefore, is not finished till it is either divided in 
equal shares among all those who have contributed to the 
result of the social labour, or till it is used for purposes 
from which all of them derive equal benefit. Spurious 
rent, on the other hand, is, as already stated, a deduction 
from the result of the individual labour of every worker. 

When, however, land is private property, not only 
the spurious, but the natural rent as well, is appropriated 
by a few, the owners of land. The equalising tendency 
of rent still aflfects all workers, reducing their earnings to 
what equal skill and exertion can produce, or is allowed 
to retain, at the margin ; but on the owners of land it 
has the opposite tendency. It concentrates into their 
hands the rent produced by the aggregate labour of the 
community, and adds this vast and ever-increasing sum to 
any earnings which they may derive from their own 
labour. Without having rendered and without rendering 
any service in return, they thus become the recipients of 
the social wealth represented by natural rent, and of the 
deduction from individual wealth represented by spurious 
rent. The equalising tendency of rent, therefore, stops 
short at the land-owning classes ; below this line it reduces 
individual wealth, above this line it increases individual 
wealth. Instead of a tendency towards equalisation, there 
is thus introduced a twofold tendency towards diflferentia- 
tion, the results of which, supported by the secondary 
monopolies previously described, may be seen in the 
startling contrasts which disfigure our civilisation : on 
the one hand, multi-millionaires, receiving an amount of 
wealth vastly exceeding that which their labour contributes 
to the conmion stock, and frequently contributing nothing 
nor rendering any other service ; on the other hand, a 
vast army of proletarians, who receive far less than their 
labour contributes, divided by a middle class vainly 
struggling to preserve its independence between these 
opposing forces. 

Private ownership of land, therefore, deprives all 
workers of their equal share in the product of their 
common labour, the natural rent of land ; it further 
creates a spurious rent which is a real deduction from the 



134 DEMOCRACY VERSUS SOCIALISM partii 

product of individual labour, and it utterly nullifies the 
economic and ethical function of natural rent. That 
which under natural conditions would tend to produce a 
homogeneous society, strong through the agreement 
between public and private interests, then produces a 
society constantly becoming more strictly divided into 
two opposing classes, and threatened with destruction 
through the conflict between public and private interests, 
artificially introduced. 

Secondary influences of private ownership of land and 
of other monopolies on the relation between employers 
and employed will be discussed in a subsequent chapter. 



CHAPTER IX 



THE THEORY OF INTEREST 



As space is a relation of extension, so time is a relation 
of succession. Every individual act follows upon or 
precedes some other act. If the sequence of one act upon 
another is immediate we speak of their succeeding each 
other in a short time ; if the seque^yce is remote we speak 
of long time. All production consists of a series of acts 
following upon each other, and all production therefore 
requires more or less time. The production of bread, 
for instance, requires the successive accomplishments at 
different intervals of sowing, reaping, grinding, and baking. 
Similarly the production of a chair requires the felling of 
a tree, cutting it into boards, planing them, cutting them 
into the requisite pieces, turning some of these, fitting all 
the pieces together, and finishing the rough chair. No 
two of these acts can be performed simultaneously, they 
all stand in the relation of sequence to each other, and the 
series therefore requires considerable time in its accom- 
plishment. In like manner every other productive process 
requires more or less time. It follows that only those 
productive processes which require little time for their 
accomplishment can be directed to the satisfaction of 
present wants, i.e. of wants existing at their initiation. 
By far the greatest number of productive processes, all 
those requiring more than a short time for their accom- 
plishment, are necessarily directed to the satisfaction of 
wants which are expected to arise in the future, i.e. after 
the process is completed. Present wants, therefore, are 
mosdy dependent for their satisfaction upon productive 



136 DEMOCRACY VERSUS SOCIAUSM part 11 

processes which were initiated in the more or less remote 
past, and the fruits of which are now maturing or have 
matured, while present labour is mostly directed to the 
satisfaction of future wants through the production of 
goods which will become available at such future date. 
Every increase in the length of productive processes post- 
pones the time when their fruits will be available for the 
satisfaction of human wants, while, as has been already shown, 
it increases the number of wants which can be satisfied. 

All but the most primitive processes of production, 
therefore, imply the capacity of men to anticipate future 
wants and their desire to provide for them. The world- 
wide, roundabout, or co-operative system of production 
implies the possession of a high degree of these faculties. 
These faculties are part of the imaginative process. In 
order that men may be able to provide for future wants, 
they must be able to form a mental picture of the state of 
their future desires, of the quantity and kind of the goods 
necessary to satisfy these desires, and of the time when 
these desires will arise and these goods will become avail- 
able, i.e. they must form some present conception of the 
value of goods which will only become available at a given 
future date. The only principle on which such goods 
can be valued is that of their marginal utility under the 
mutual action of our wants and the provision for these 
wants as we anticipate them to be at some future date. 
Apart from the element of risk, our present valuation of 
future goods is, therefore, made on the same principle as 
that of present goods, i.e. goods available at the present 
time. As these two sets of goods, however, become 
available at diflferent times, under diflferent circumstances, 
and serve diflferent sets of wants, it is inevitable that a 
diflferent valuation should be placed upon them at the 
present time. With few and unimportant exceptions this 
diflference shows itself in a higher present value being 
placed on goods which are available at present than on 
goods of like quantity and kind which only become 
available at some future time. This diflference in value 
is the cause of interest, which therefore arises from the 
extension of man's labour in time. 



CHAP. IX THE THEORY OF INTEREST 137 

The following are the main reasons for the higher 
value of present than of future like goods : — 

All persons who expect or hope that they will be 
better off in the future than in the present, that is the 
vast majority of men, will naturally value a given quantity 
of present goods more highly than an equal quantity of 
like goods in the future. For while their present wants 
are pressing upon their means to satisfy them they expect 
a less pressure in the future. The case of musical students 
who mortgage a great part of their future earnings in 
order to obtain present tuition is an extreme case in 
point. 

On the other hand, persons who enjoy a good income 
in the present, but who anticipate that it may fall off or 
altogether cease in the future, such as employees with 
fixed salaries which may cease, will value goods becoming 
available at this future period more highly than goods 
available at present. This feeling, however, exerts no 
influence, because present goods can be preserved for use 
at such future period, especially in the shape of money, 
and can thus be used either for the satisfaction of present 
or of such future wants ; whereas goods which do not 
become available till such future time cannot be used 
for the satisfaction of present wants. Hence, even in 
these cases, present goods are valued more highly or, 
at least, as highly as future goods of like quantity and 
kind. 

This difference in provision for wants between present 
and future is sufficient to give a higher subjective, and 
therefore a higher objective, value to present than to 
future goods. This tendency is, however, increased by 
other causes. 

The first of these is a tendency towards the under- 
valuation of future wants inherent in all men. That 
which lies nearest looms largest. Future wants are under- 
estimated because they are distant and in the measure of 
their distance, and, therefore, the goods which can satisfy 
none but such future wants are undervalued. This 
underestimation of future wants differs in different men. 
Savages and children scarcely take any thought of distant 



138 DEMOCRACY VERSUS SOCIALISM partii 

wants, and among adult civilised men wide differences 
also appear. Nearly all men, however, give way to it to 
some extent. 

This second cause is cumulative with the first. Not 
only the persons who expect to be better off in the future 
than they are in the present, but all, or nearly all, other 
men make this underestimate of their future wants, and 
hence the lower valuations placed on future than on present 
goods is made more intensive and more extensive. 

A third and independent cause for the same phenomenon 
arises from the technical superiority of present over future 
goods, i.e. from the fact that, as a rule, goods which are 
available now give, when used as instruments for the 
production of other goods, a greater return than goods 
which become available in the future for such use. 

As already explained, lengthier methods of production 
are, on the whole, more productive than shorter methods. 
Given the same quantity of productive instruments and 
labour, the lengthier the method of production in which 
they are employed the greater will be the quantity or 
the better the quality of the resulting product. 

Suppose now that we have available in the year 1898 
a quantity of productive instruments equivalent to one 
month's labour. We can employ this one month's labour 
in methods of production which will give an inmiediate 
return, or in such as will give a more or less remote future 
return through the application of more labour, — with 
this difference, however, that as we chose a lengthier 
method, so the future product of this month's labour, 
as well as that of every other month's labour successively 
employed in this particular process, will be increased. 
Let it be supposed that its product in immediate pro- 
duction wiU be 100 units of wealth ; in a one year's 
process 200 units; in a two years' process 280; in a 
three years* process 350 ; in a four years' process 400 ; in 
a five years' process 440 ; in a six years' process 470 ; and 
in a seven years' process 490. Any other figures will do 
as well, as long as the principle is observed that longer 
processes give greater return, but that the return increases 
at a less ratio than the length of process. 



CHAP. IX THE THEORY OF INTEREST 



139 



The following table will show when these units of 
wealth, the product of one month's labour, will become 
available : — 



Length of Process. 


Units of Product. 


Time of Availability. 


Immediate 
One year . 
Two years 
Three years 
Four years 
Five years 
Six years . 
Seven years 






100 
200 
280 
350 
400 
440 
470 
490 


1898 
1899 
1900 
I90I 
1902 
1903 
1904 
1905 



Suppose now, that in addition to the production-goods 
equivalent to one month's labour, which are available 
tch-day, we expect an equal quantity of such goods to 
become available in each of the years 1899, 1900, and 
1 90 1, let us see what will be the relative result at any 
future time of these four separate months of labour when 
employed in production : — 



One Month's Labour of the Year 



Yield in units of 


1898. 


1899. 


1900. 


1901. 










product for the year : 










1898 


100 


• • • 


• • • 


• . . 


1899 


200 


100 


• • • 


• . « 


1900 


280 


200 


100 


• . . 


1901 


350 


280 


200 


100 


1902 


400 


350 


280 


200 


1903 


440 


400 


350 


280 


1904 


470 


440 


400 


350 


1905 


490 


470 


440 


400 



The above table clearly shows that present production- 
goods yield at any given time a greater return than goods 
of like quantity and kind which become available at a 
later period. 



HO DEMOCRACY VERSUS SOCIALISM partii 

It is also obvious that the possibility of engaging in 
lengthier and, therefore, more profitable processes of pro- 
duction arises from the present possession of consumption- 
goods. If these were not available in sufficient quantities, 
labour and capital would be compelled to engage in shorter 
processes, giving forth their products at earlier periods,, 
though in smaller quantities compared with the exertion 
employed. The increased result of the lengthier processes, 
therefore, is in this measure due to the possession of con- 
sumption-goods available in the present, not because they 
are capital, but because they enable capital to be used in 
processes of greater utility. Therefore, present consump- 
tion-goods possess the same technical superiority over 
future consumption -goods which present production- 
goods possess over future production-goods. 

The three causes enumerated for the higher value of 
goods available in the present than of goods which will 
become available at any future time, are : — 

(i) The difference in the circumstances of provision 
for wants between present and future. 

(2) The underestimate of future wants and of the 
importance of future goods. 

(3) The greater productiveness of lengthier methods of 
production and consequent technical superiority of present 
goods. 

While the two first causes are cumulative, the third 
cause acts independently and largely alternatively. To 
show this in detail here would lead too far ; suffice it to 
say, that this alternative action gives to the phenomenon 
of higher valuation of present goods a varying intensity 
but universal validity. The varying intensity of subjective 
valuations enables exchanges of present against future goods 
to take place. Those who place a relatively high value 
on future goods are buyers of future goods, i.e. lenders ; 
those who place a relatively low value on future goods are 
sellers of such goods, i.e. borrowers. A market price, 
resulting from their higgling, once established, exerts a 
reflex action on all subjective valuations, so that even 
those few who, from their economic circumstances, would 
value future goods equally with present goods are influ- 



CHAP. IX THE THEORY OF INTEREST 141 

enced by the general position of the market, which assures 
them also a preference for present goods. The same 
levelling tendencies of the market bring the lower value 
of future goods into a regular proportion with their 
remoteness in time, establishing everywhere a rate of 
interest which is the general measure for the difference 
between the value of present goods and that of goods 
which become available at any future time. 

Of the three causes, the combined action of which 
gives rise to interest, one only, the technical superiority of 
present goods, is invariable in its action. Of the others, 
the underestimation of future wants declines in intensity 
and extensity as men become better adapted to the condi- 
tions of social life. The third cause, difference in the 
provision for wants between present and future, also will 
be less active when a just system of distributing wealth is 
adopted. For, in such case, the present needs of all will 
be more easily met, while a great majority will be able 
and desirous to retire from productive labour at a com- 
paratively early age. Present needs will, therefore, be 
less pressing and future needs more pressing, leading to a 
reduction, from both sides, of the difference of valuation 
of present and future goods. 

The causes which have resulted in a decline of the 
rate of interest in the past, will therefore continue and 
may be reinforced in the future, leading to a further, 
permanent, and large decline of the rate of interest. That 
interest ever will or can disappear entirely, however, does 
not seem probable, in view of the persistence of the 
technical superiority of present goods, and of the im- 
probability of the entire disappearance of the two other 
causes which gave It existence. 

In a former chapter ^ it has been shown that the value 
of productive instruments is determined by the marginal 
utility (value) of the sum of the consumption-goods which 
form their ultimate product. This ultimate product, 
however, is not contemporaneous with the productive 
instruments ; it appears as these disappear in it. Com- 
pared with the productive instruments which give it being, 

1 Part II. chap. ii. 



142 DEMOCRACY VERSUS SOCIALISM partii 

the final product is a group of future commodities ; of 
goods which will become available in the future. The 
present value of this finaJ product, i.e. its value measured 
in present goods, is therefore lower than its future value, 
and therefore the value of the productive instruments is 
also lower than the future value of the consumption- 
goods into which they become embodied. It is equal to the 
present, and not to the future, value of these future goods. 

The capitalist, therefore, buys productive instruments 
at the present value of the sum of their ultimate products, 
and waiting till these latter have arrived at maturity, till 
what is now the future has in its turn become the present, 
becomes possessed of their higher value. This increment 
in value is the interest which he receives. 

To illustrate this sequence of events, take the case of 
a capitalist who purchases productive instruments, material, 
tools, and labour ; and in order to simplify the illustration, 
let us assume that he purchases them all at one and the 
same time, i.e. at the beginning of the productive process. 
The circumstance that this is not quite true does not 
affect the principle but only the amount of interest which 
he will receive. Let it be further assumed, that the sum 
of the final products of these productive instruments has 
a total value, when they are available, of 500 units ; and, 
further, that of these total ultimate products, equal parts 
become available at the end of each of five successive years, 
and possess at that time a value of 100 units, so that at 
the end of five years the whole product has been realised 
and the productive instruments have disappeared. 

All these products are future goods at the time the 
capitalist purchases his productive instnmients. Their 
present value, therefore, i.e. their value measured in 
present consumption-goods, is less than that which they 
will possess when they in their turn will be available for 
the satisfaction of human wants, when they will have 
become present consumption-goods. That part of the 
total product which will become available at the end of 
one year, and which then will have a value of 100 units, 
possesses now a value of say 95 units only ; the second 
part available at the end of two years has a present value 



CHAP. IX THE THEORY OF INTEREST 143 

of 90 units ; the third year's product equals 85 units ; 
the fourth year's product equals 80 units ; and the fifth 
year's product equals 75 units. The total present value 
of these consumption-goods, the future product of the 
group of productive instruments in question, and having 
a value of 500 units when they become available, is 425 
units only. Therefore, the value of these productive 
instruments is 425 units, equal to the present value of 
their ultimate product. Our capitalist purchases them at 
this price, and the interest which he receives arises from 
the fact that he has purchased with a smaller quantity of 
mature goods, possessing a present high value, a larger 
quantity of immature goods, possessing a present low 
value, and that he waits until this latter in its turn has 
ripened into high value. 

This interest, therefore, is not taken from any one. 
It arises, as has here been proved, when the capitalist pays 
full value for all the productive instruments, labour in- 
cluded, i.e. when he pays a price for them equal to the 
value of the sum of their products. It had no existence 
before ; it came into existence in the hands of the capi- 
talist, because he is a capitalist, i.e. because he, possessing 
more goods at present available for the satisfaction of 
himian desires than he himself needs, exchanges them for 
goods which, in their turn, will be able to satisfy human 
wants at some future time. As, in the continuous process 
of production, those future goods gradually approach use- 
fulness, and the more pressing, because more proximate, 
human wants, their value increases, until at last this utility 
and value reach their highest point, that of goods which 
can satisfy the most urgent wants, i.e. wants actually 
existing. Interest, therefore, is not, as Socialism posits, a 
robbery of labour, but an increment of value which arises 
from the natural extension of human labour in time and 
separately from the exertion of labour. 

That interest cannot be regarded as part of the product 
of labour, and that, therefore, it is not a deduction from 
the legitimate wages of labour, i.e. the full product of the 
labourer's exertions, will, however, be demonstrated still 
more fully in the next chapter. 



CHAPTER X 



THE WAGES OF LABOUR 



The foregoing examinations have paved the way for the 
inquiry, what part of the product of the industry of society 
rightfully belongs to those who take part in its production, 
i.e. to the producers of wealth of every kind, as producers. 
Obviously, the most that each producer can obtain indi- 
vidually is the entire product of his labour, and, as will be 
shown in subsequent chapters, this is also the least that 
justice demands for him. The only question which 
concerns us here is what constitutes the produce of indi- 
vidual labour. 

Man as such, whether isolated or in co-operation with 
others, produces nothing. All wealth is the joint product 
of labour and land. As already demonstrated, the exten- 
sion of man's labour in space, which natural conditions 
impose upon him, and the variations in the productivity 
of land, produce the widest divergence between the natural 
conditions under which labour is exercised. Inevitably, 
the opportunity which some use is better or worse than 
that which others can use, and ultimately the differences 
become of enormous importance. 

As a consequence, the same unit of skill and exertion 
will produce many times the amount of wealth from one 
piece of land than when put forth upon some other piece 
of land. The excess is not due to any labour ; it arises 
from the greater bounty of nature. To whom then does 
it belong? To the man who by accident labours upon 
the more productive land? Or to the owner who, by 
purchase, inheritance, or fraud, got hold of it ? Or does 



CHAP. X THE WAGES OF LABOUR 145 

it not rather belong to the society, the whole body of men, 
as a common fund to provide for their common needs ? 
Nature owes to all men an opportunity to maintain their 
lives by labour. But no man can possess a natural right 
to the use of a better natural opportunity than others can 
obtsun. Hence, that part of wealth which arises from the 
use of a better natural opportunity than the least pro- 
ductive which must be used, i.e. the natural rent of land, 
must be deducted from the reward of individual labour, as 
being, ethically and economically, no part of the product 
of such labour, and must be put into a common fund, of 
which every member of society is entitled to an equal 
^bare. 

In natural rent, therefore, we found one deduction 
which must be made from what might, superficially, be 
regarded as the product of individual labour. Just as this 
d^uction becomes necessary owing to the extension of 
man's labour in space, so another deduction must be made 
on account of the extension of his labour in time. As 
was shown in the last chapter, interest, that is natural 
interest, arises from the greater value possessed by goods 
available in the present, than that possessed by an equal 
quantity of the same kind of goods which only become 
available in the future. It remains to apply this condition 
to the wages of labour, separately from that already made 
with regard to all productive instruments. Suppose a 
ploughman has given a week's labour in ploughing a field, 
which eight months hence will yield 800 bushels of wheat. 
Suppose, likewise, that this one week's labour is exactly 
one-hundredth part of all the labour required to produce 
the wheat at the flour-mill, where it is worth 4s. per bushel. 
The ultimate value of the product of the ploughman's 
labour in that case is 800 x 4s. = 3200s. divided by 100 
= 32s. To this value he is manifestly entitled at the 
time when the wheat, the produce of the joint-labour of 
himself and others, is available, i.e, at the end of eight 
months. If there were no employer, he could not justly 
receive more than this amount, nor could he receive it earlier. 
But can he be entitled to this amount at the end of the 
week, when his labour ceased ^ Obviously not, for the 



146 DEMOCRACY VERSUS SOCIAUSM part ii 

product of his labour and that of others, the 800 bushels 
of wheat, had a smaller value at the end of the week's 
ploughing than eight months afterwards, when it became 
available, and his share, therefore, also had a smaller value 
at the earlier time. Hence, though the ploughman is 
entitled to a wage of 32s. at the end of eight months, he 
cannot be entitled to 32s. now, as, in that case, he would 
receive more than the present value of what his labour 
produces. If he will wait till the product of his labour is 
matured, he is entitled to its then full value ; if he wants 
to reap now the reward of his labour, when its product is 
as yet immature, he cannot be entitled to more than its 
present value. 

If, instead of working for wages, the ploughman is an 
independent farmer, he cannot obtain the product of his 
labour at the end of the week's ploughing, but is com- 
pelled to wait for it for eight months, till the harvest 
is gathered. The ploughman cannot be entitled to 
better conditions and a greater return to his labour, 
because he works for an employer, than he could obtain 
if he were working on his own account imder exactly like 
circumstances. 

Suppose, then, that the general valuation of the com- 
munity places 3000s. available now at exactly the same 
value as 3200s. available eight months hence. In that case 
the value of the harvest was 3000s. at the time when the 
ploughing was ended, and as this ploughing constitutes 
one-hundredth part of all the labour which produced the 
harvest, the ploughman would be entitled to the one- 
hundredth part of 3000S., i.e. he would be entitled to 
30s., that being the then value of the ultimate product 
of his labour. The difference between 30s. and 32s. — 
between the present and the ultimate value of the product 
of the ploughman's labour — obviously belongs to him who 
purchases this inmiature product of labour with mature 
products, i.e. the employer who pays wages. 

The importance of the subject under discussion may 
justify, even at the risk of tediousness, the use of a further 
illustration which applies the same considerations to 
manufactures in a more detailed manner. Taken from 



CHAP. X THE WAGES OF LABOUR 147 

BOhm-Bawerk*s Capital and Inter est^ it has been largely 
modified. 

Suppose an engine to be constructed from the ore 
upwards by one workman, working continuously for five 
years, and that, when completed, the engine possesses a 
value of ^550. Let it also be assumed that the labour of 
each year produces a result exactly equal to a fifth part 
of the engine. Nevertheless, the workman could not be 
entitled to one-fifth part of the value of the completed 
engine, jf 1 10, at the end of the first year, for the reason, 
that an engine ready for use now has a greater value than 
one exactly similar, but which will not be ready for use till 
four years hence. If it is assumed that the general pre- 
ference for goods available now, over similar goods available 
at some future time, is equal to 5 per cent per annum,^ the 
workman is entitled at the end of each year to no more 
than £ 1 00. The proof of this statement is found in the 
fact, that when paid at this rate, the workman receives in 
the course of five years exactly the same value as if he 
waited for payment till his engine was completed. 

For between the end of his first year's labour and the 
date of completion of the engine, there intervenes a period 
of four years ; between the end of the second year's labour 
and completion the interval is three years ; between that 
of the third year's labour and completion it is two years ; 
and for the fourth year's labour it is one year ; while the 
end of the last year's labour and the date of completion of 
the engine coincide. At the assumed rate of preference, 
^ 1 00 received by the workman at the end of the first year, 
therefore, exceeds the value of ^100 to be received by 
him at the end of the fifth year by 4 x ^5 =^£20, and a 
corresponding excess of value adheres to each of the sums 
of ^100 which he receives at the end of the intervening 
years. Paid ^100 at the end of each year, the value of 
all five payments at the date of completion of the engine 
would be £sS^y ^'^* exactly the same amount which he 
would have received if he had waited till the engine was 
completed and its full value belonged to him ; as 
under : — 

^ For the take of limplicity compound interest hu been eliminated. 



148 DEMOCRACY VERSUS SOCIALISM partii 



iCioo at 5 % 


for 


4 years 






= ^120 


100 


» 5 % 


» 


3 ,» 






= 115 


lOO 


...5% 


w 


2 „ 






= no 


lOO 


"S% 


» 


I „ 






= 105 


lOO 


at com 


pie 


tion 






= 100 




Total 


/550 



It is clear, therefore, that the same increment which 
the workman would receive from the growth of the engine 
towards completion, he will also receive when he is paid 
^100 at the end of each year, through the excess of value 
which four of these sums possess at the time of payment 
over four-fifths of the then value of the future engine. If 
at the end of each year he were to receive jf no, the fifth 
part of the value of the completed engine, he would receive 
more than the value of the completed engine by ^55, as 
under : — 



£1 10 at 5 % for 4 years 

"0 »» 5% »» 3 ,. 
no „ 5% „ 2 „ 

no „ 5% „ I „ 




^£^3^ 










= 126 


10 







= 121 










= 115 


10 





1 10 on completion 


Total 


= no 










;C60S 









If it is objected that the workman probably lacks the 
means which would enable him to invest these several sums 
so as to reap the interest, and that he wants annual pay- 
ments so as to be able to live, the answer is : — 

The needs of the workman for present sustenance do 
not lead him to place a lower than the general valuation 
upon present as compared with future goods. He, like 
every one else, values present goods at a higher rate than 
future goods. A sum of ^100 now is, therefore, in his 
own estimation, as well as in every one else's estimation, 
worth ^120 as compared with a sum of ^100 four years 
hence. In receiving ^100 now, he, therefore, receives a 
value of ^20 more than if he waited for four years, whether 
he invests that sum or not. 

Moreover, the fact that he wants ^100 for present 



CHAP. X THE WAGES OF LABOUR 



149 



consumption, while his labour has not yet produced a 
consumable equivalent, cannot entitle him to receive, and 
cannot oblige any one to pay him, more than the total 
value of the engine when completed. Yet, as has been 
shown, were the employer or other purchaser of the engine 
to give more than ^100 at the end of each year, he would 
pay, and the workman would receive, more for the engine 
than the one would have to pay and the other would receive 
if payment were deferred till the date of completion. As 
no one can claim that more than the full value of the 
engine shall be paid when the payment is deferred, it 
cannot be claimed that more than its full value shall be 
paid when the payment is made in instalments. 

Suppose now that, if instead of one workman working 
for five years, five workmen, each working for one year by 
himself, were employed successively in the production of 
this engine, and that each of them produces exactly one- 
fifth part of the engine. In that case an injustice would 
be "done to the first and second labourer, and an undue 
preference would be shown to the fourth and fifth labourer, 
if the value of the engine were divided equally amongst 
them at the end of the fifth year, each receiving ;^iio. 
For the former would have completed their task four and 
three years respectively before they received payment, 
while the last worker received his immediately on com- 
pletion of his work. A fair division of the product ot 
their joint labour must take this diflFerence of time into 
account. At the assumed rate of preference the division, 
therefore, ought to be : — 



First labourer 


• • • 




^120 


Second 


»» 


• • * 




"5 


Third 


»' 


• • 




no 


Fourth 


»» 


• • 




105 


Fifth 


>» 


. . 


Total 


100 




£sso 



On the other hand, it is impossible for each of these 
labourers to get ^ 1 1 o immediately his task is done. For, 
as has already been shown, the total payment made for the 



I50 DEMOCRACY VERSUS SOCIALISM parth 

engine would in that case be ^605, or ^55 more than its 
assumed value. 

Let us, however, introduce a capitalist who will pay 
for the engine in yearly instalments, and who is anxious 
to pay its full value and to treat all the workmen equally. 
Seeing that a just scale of division between the workmen, 
in his absence, will yield to the last workman jf 100 on 
completion of his share of the work, the capitalist will 
treat him with absolute fairness by paying him this amount. 
Inasmuch, however, as the other workmen have contributed 
no more skill and exertion to the completed engine than 
this one, they cannot be entitled to a larger payment for 
the result of their labour on the completion of their task 
than the last workman is entitled to on the completion of 
his task. Therefore, each of the other workmen is also 
entitled to no more and no less than ^100 at the end of 
his task. In this way not only equality of .treatment for 
each, but absolute fairness to all is preserved. For 
inasmuch as the several payments are made at different 
periods before the completion of the engine, each payment 
of ^100 stands in a different relation of value to that of 
the completed engine, and represents, at the completion 
of the engine, the same value which would have accrued to 
each workman from a just division if no employer had 
interfered ; as under. Beginning this time with the last 
labourer, we find : — 

Labourer 5= jf 100 . . . =jfioo 

= 105 
= no 

= "5 



„ 4= 100 at 5 % for I year 
„ 3= 100 „ 5 / „ 2 yean 

/o »> 3 >» 
I = 100 „ 5 % „ 4 



>» * — *^*^ »> 3/0 » T » 



= 120 



Total £sso 

The capitalist, by paying to each labourer jf 100, there- 
fore, takes nothing from any one of them to which he is 
entitled. What the former gains is the increment in value 
which accrues to the engine in its growth towards maturity, 
and which would have been gained by some only of the 
labourers, not as labourers, but as capitalists, had they 
been capitalists as well. The capitalist is entitled to this 



CHAP. X THE WAGES OF LABOUR 151 

increment because he exchanges goods of present utility for 
something which will acquire utility at some future date. 

This function of the employer — the fact that, apart 
from organising and directing labour, he is a lender ; that, 
as such, he purchases from the labourers employed by him 
as well as from those who produced the implements and 
materials used by the former, a greater quantity of goods 
of present low value with a smaller quantity of goods of 
present high value — is generally overlooked. Yet it is this 
function which entitles him to receive interest. With 
goods capable of satisfying present wants, he purchases 
goods which can only satisfy future wants, through the ap- 
plication of more labour. He waits till the product of labour 
ripens into full value, and in the meantime gives to labour, 
under natural conditions, the full present value of its pro- 
duct, in goods which have already ripened into usefulness. 
As labour in the present cannot be entitled to more than 
the present value of its product — to more than it can 
obtain in the absence of any employer — natural interest 
is no deduction from the legitimate wages of labour, be- 
cause it forms no part of the product of labour. 

What, then, are the factors which, under the existing 
co-operative system of production, regulate the individual 
wages of labour under these just conditions, when, monopolies 
being abolished, natural rent goes to the community, and 
natural interest to the owner of capital. In Part II. 
chapter iii. it has been shown that lengthier processes ot 
production yield increased returns. Against this ad- 
vantage must be placed the disadvantage of increased 
interest-charge. The advantage may be equal or greater 
than the disadvantage, but it is reasonable to suppose that 
if it were less, the lengthier process would not be adopted. 
Take now a tradesman who is in a position either to enter 
upon a four years' process by himself or on a two years' 
process if he engages another workman to assist him. 
Let the product of their joint labour possess a value of 
j^4i6 at the end of the two years' process, or equal to an 
average wage of 40s. per man and week, while that avail- 
able at the end of the four years' process by one man is 
j^520, or an average of 50s. per week. If the employer 



152 DEMOCRACY VERSUS SOCIALISM partii 

now pay to the workmen, on the termination of the two 
years' process, one - half of the product of their joint 
labour, each of these two workers will receive ^f 208. 

If, however, this tradesman works by himself in a four 
years' process, he will, at its termination, become possessed 
of ^520, which divided by two would be equal to ^260 
at the end of a two years', process. For each of these two 
periods of two years the employer would thus receive ^52 
more than if he had engaged an assistant and had paid 
him the fuU product of his labour. It, therefore, would 
be more to his advantage to work by himself on the 
longer process, and this, therefore, he would undoubtedly 
do, unless some worker were willing to accept as much 
less than the full product of his labour as would yield the 
same advantage to the employer. 

This example shows that, even under absolutely just 
and natural conditions, employers can secure for them- 
selves not only interest, but also all the advantages which 
result from the extension of processes. The power to do 
the latter, however, does not, under such natural condi- 
tions, come to the employer as an employer, but as a 
workman, for, as will have been seen, it arises from his 
ability to employ all his capital by his own labour. The 
capitalist-employer cannot so employ his capital. In the 
absence of monopolies he cannot obtain any income from 
the bulk of his capital unless it is employed productively 
by other men's labour. This fact profoimdiy influences 
the relation between capitalist-employers and labour under 
natural conditions. For under such natural conditions, 
land being free, large numbers of labourers could employ 
themselves if the conditions of capitalist-employment did 
not suit them. They, therefore, would not agree to enter 
the service of an employer unless they could earn at least 
as much as if they employed themselves. 

Suppose, then, that a good proportion of workmen 
possess sufficient means to employ their own labour in a 
two years' process, yielding at the end of that period an 
average return of 40s. a week ; that more labourers 
possess enough for one year's process, yielding on its com- 
pletion 25s. a week ; while the remaining workers can only 



CHAP. X THE WAGES OF LABOUR 153 

employ themselves in shorter processes, yielding say 12 s. 6d. 
a week, or cannot employ themselves at all. Suppose also 
that capitalist processes vary in length, but average six 
years, yielding an ultimate product averaging 55 s. per 
week and workman. What would be the rate of wages 
under these conditions ? 

The employers, unable to obtain sufficient labour 
otherwise, would be compelled to induce some of those 
who can independently earn an ultimate wage of 40s. per 
week to enter their employment. These men, however, 
could not be induced to do so, unless at least the equi- 
valent of that amount were assured to them. The lowest 
rate which they could be induced to accept would, there- 
fore, be, say 38 s. 6d., payable at the end of each week, 
this being equal to 40s. a week payable at the end of two 
years. This is the minimum which they will accept. In- 
asmuch, however, as all other workmen, who are earning 
less than these, are also required by the employers, all 
these would and could insist upon receiving the same rate 
of wages, and this rate, therefore, would be the minimum 
rate for all workmen. 

On the other hand, the maximum rate which employers 
could pay would be 48s. 6d. payable weekly, as, this being 
the equivalent of an average of 55s. per week available at 
the end of six years, they would otherwise pay more for 
labour-products than their value at the end of each week. 
Hence the average wages of labour under these conditions 
could not fall below 38 s. 6d. per week, and could not rise 
above 48s. 6d. per week. Within these limits they would 
be determined by the pressure of the stronger party, and 
that party is labour. For labourers could employ them- 
selves, while capitalists cannot themselves employ their 
capital. If no agreement were arrived at, labourers could 
earn an independent income, but capitalists could obtain 
no income from their capital. Hence wages must rise 
to the maximum 48s. 6d., and every extension of pro- 
cesses, every invention and every discovery, would enable 
labour to enforce a further increase in its wages, absorbing 
all the advantages of industrial progress and of a declining 
rate of interest. 



154 DEMOCRACY VERSUS SOCIALISM partii 

What has here been demonstrated is : — 

1. That natural rent and natural interest are not de- 
ductions from the produce of individual labour or from 
the wages due to the individual labourer. 

2. That under natural conditions, i.e. when State- 
created monopolies are abolished, every labourer would be 
assured of receiving from the capitalist-employer, as his 
wages, the full product of his individual labour, and that, 
in addition, he would possess an equal share with all others 
in the produce of the common labour, the natural rent of 
land. 

When, however, the natural conditions, here pre- 
supposed, are superseded by artificial conditions based on 
private ownership of land, the position of labour is pro- 
foundly altered. 

The warping of the moral sense of the community 
and the obscuration of true economic principles which arise 
from the existence and toleration of the all-pervading 
monopoly in land, give origin to other and secondary 
monopolies. Some of these are merely land-monopolies 
in disguise, such as franchises which allow the exclusive or 
privileged use of city streets for industrial purposes, or 
which give exclusive rights-of-way, as in railways. Others, 
like protective monopolies and the resulting rings and 
trusts, are not connected directly with land-monopoly, but 
could never have been established if the economic know- 
ledge of the people had not been obscured by its existence. 
Many secondary monopolies, therefore, are part and parcel 
of the monopoly of land, and all others are indirectly 
promoted by it. Every monopoly exacts tribute from 
the workers of the community in the shape of spurious 
rent or spurious interest, which they pay either in their 
capacity of producers or in that of consumers, or in both 
these capacities. 

Before entering upon the detailed demonstration of 
the evil consequences of monopolies, it may not be 
useless to point out, that it is a matter of indifference to 
labourers in which of these ways their wages are curtailed. 
Whether money-wages fall from 40s. to 30s. a week, i.e. 
25 per cent, or whether the price of all the things which 



CHAP. X THE WAGES OF LABOUR 155 

the labourers buy with their wages experience an average 
rise to the same extent, has exactly the same consequences 
for them. Similarly, a fall in prices has the same influence 
on their wellbeing as an equivalent rise in wages. For 
the real wages of labour do not consist of the stamped and 
lettered pieces of metal or paper which the labourer receives 
at the end of a week, a fortnight, or a month. They 
consist of the sum of goods and services which his wages 
can procure for him. Real wages, therefore, increase, and 
increase largely without any rise in money-wages, if prices 
fall ; and, similarly, real wages fall, without any reduction 
of money-wages, if prices rise. All monopoly- prices, 
therefore, involve a real reduction of wages. 

Similarly, the social possession of natural rent may 
enormously benefit the workers, apart from any consequent 
rise of wages, if its use for social purposes relieves them 
of existing taxation on the goods which they buy, and 
brings within their reach satisfactions which they do not 
now enjoy. 

In Fart II. chapter viii. it has been shown that private 
ownership of land affects labour directly in three ways : — 

1. By absorbing their equal share in the social wealth 
represented by natural rent, and thus compelling taxation 
which directly reduces wages by increasing the prices of 
the necessaries and comforts of life. 

2. That, by lowering the margin of production, it 
lowers the aggregate labour-result of the community. 

3. That this artificial lowering of the margin of pro- 
duction produces a spurious rent, which constitutes a 
direct deduction from the wages of individual labour. 

Far-reaching as these direct influences of land-monopoly 
are, they are rivalled in importance by its indirect influ- 
ence. Under natural conditions, when the land is not 
monopolised, labourers can employ themselves. As has 
already been shown, the advantage in bargaining with the 
capitalist-employer then rests with the labourers. 

The importance of this factor is fully illustrated in 
new countries. In such countries capital is scarce, trans- 
port difficult, and owing to scarcity of population, the 
division of labour incomplete. The produce of labour. 



156 DEMOCRACY VERSUS SOCIAUSM part 11 

therefore, is on the average far less per labourer in new 
countries than in older countries. Nevertheless the wages 
of labour are on an average higher, and generally much 
higher. The reason is, that the low price of land and 
the easy conditions on which it can be obtained, enable so 
large a proportion of the existing labour -force to dis- 
pense with employers and to produce on their own 
account, that capitalist-employers must bid high for labour. 

Where, however, all the land, or all the more produc- 
tive land, has passed into private ownership, there may be 
any amount of unused or only partly used land, yet labour 
cannot obtain any of it except on conditions with which 
but few labourers can comply. Hence their power of 
employing themselves is gone, they are placed at the 
mercy of employers, and must accept lower wages than 
they otherwise would consent to. Not only the landlord 
is now cutting into the legitimate wages of labour, not 
only is interest unnecessarily high, but the privileged 
employer also is able to appropriate part of the legiti- 
mate wages of labour. The latter now frequently gets 
more than legitimate interest. Apart from any legal 
monopoly which he may possess, and in addition to the 
legitimate wages of superintendence, he now frequently 
obtains a further increment. 

This increment, which we may term profit, is itself of 
a composite nature. It consists partly of exceptionally high 
wages of superintendence, arising from partial monopoly 
of the opportunities for acquiring the necessary qualifica- 
tions ; partly of the advantages which arise from discoveries 
and inventions equally applicable to all land ; partly of 
the advantages which arise from the fact, that rent, advan- 
cing through competition, frequently lags behind the pro- 
gress in arts and sciences when the latter is continuous. 
Where this is the case, some of the advantages even of 
discoveries and inventions which are applicable to particular 
land alone and which have been generally adopted, remain 
for a time with the undertakers. All these would go to 
labour were labour independent ; they go to the em- 
ploying capitalist when the labourer's independence has 
been destroyed. 



CHAP. X THE WAGES OF LABOUR 157 

Other monopolies, exercising their wage - lowering 
influence upon labour directly in its capacity of consumer, 
do so indirectly in labour's capacity of producer as well. 
They enable the owners of the monopolies to raise the 
price of the goods which they sell or of the services which 
they render, over and above what these prices would be 
under competitive conditions. The workers, paying these 
higher prices, thus lose part of their wages. A given 
amount of money-wages now buys less of services and 
goods. But inasmuch as the vast majority of purchasers 
(consumers) are workers for wages, this reduction in the 
purchasing power of wages involves a large reduction in 
production as well. Goods which cannot be consumed, 
will not, in the long run, be produced. Therefore employ- 
ment is largely curtailed, the already one-sided competition 
of labourers for employment is increased, labour is placed 
at a further disadvantage with regard to employers, and 
a further fall in the rate of wages must ensue as an 
indirect consequence of the rise in prices which monopoly 
enforces. 

Thus, whether labour is deprived of its natural wages 
by a lowering of money-wages through the influence of 
land-monopoly, or whether the deduction arises from an 
increase of prices through the action of other monopolies, 
the result is the same. In either case the vast majority 
of the people are compelled to consume less than they 
produce, and, unless an equivalent increase of consumption 
takes place amongst the appropriating classes, an army of 
unemployed men, an increase of the competition between 
labourers for permission to work, a still further fall in 
wages, and a general lowering of the condition of the 
masses of the people is the inevitable result. 

The counteracting tendency above alluded to, the 
equivalent increase in the consumption of the rich, how- 
ever, fails to arise. Primarily, the wealth which any man 
obtains consists in goods, the produce of labour. This 
holds good of millionaires and proletarians alike. The 
tribute which a monopolist exacts from labour consists of 
goods made by these labourers and of nothing else. If 
the owners of these tribute-rights were willing and able 



158 DEMOCRACY VERSUS SOCIAUSM partii 

themselves to consume the goods which they take from 
labourers, the evils of monopoly would be much reduced. 
It would still involve the injustice that the makers of 
wealth are deprived of a large part of this wealth, but the 
consequences of this injustice would be far less disastrous. 
Unfortunately, however, the monopoly-owners will or can 
consume these goods only to a limited extent. The less 
wealthy among them want to become more wealthy, and 
the wealthier ones are animated by the same impulse, 
though they cannot possibly consume the whole of their 
incomes. Both these sections, therefore, save a consider- 
able part of their incomes, i.e. of the goods which they 
claim from labour. There are, however, only two ways 
in which wealth can be saved to a large extent and for 
any length of time. One is, by the multiplication ot 
factories, railways, steamships, and other forms of pro- 
duction-goods. Much of the wealth so saved is wasted, 
but the larger part of it is usefully employed in extending 
the roundabout process of production and consequently 
increasing the product of labour. But this increase in the 
product of labour is not accompanied by an adequate 
increase in the consumptive power of labour, i.e. the wages 
of the additional labourers employed still fall short, and 
far short, of the value of the additional goods produced, 
and, hence, there is an increase in the under-consumption 
previously existing. 

The only other way in which wealth can be saved to 
its owners is through the creation of new monopolies or 
the extension of existing ones. Here there is either no 
additional production — as when rent rises through lower- 
ing the margin of production — or a comparatively small 
increase only. But there arises from this process a further 
contraction of the consumptive power of labour. For 
every such creation or extension of monopoly increases 
the tribute which labour must pay to its owners, and, 
therefore, reduces the wealth which it otherwise could 
retain for its own consumption. Hence there must arise, 
here also, an increase in the previously existing under- 
consumption of goods. 

It foUows that periods must arise, from time to time. 



CHAP. X THE WAGES OF LABOUR 159 

when a further saving of goods becomes impossible, i.e. 
when no additional capital can, for the time being, be 
employed profitably in industry, and when, for the time 
being, no more monopolies can be created. What becomes 
then of the vast amount of goods which the appropriators 
will neither consume themselves nor permit labour to con- 
sume ? They cannot be destroyed or in any other way 
got rid of at once. Therefore their existence clogs the 
wheels of industry ; further production must be curtailed 
till they are consumed gradually. This is what is called 
a commercial crisis : factories and workshops close ; 
labourers must starve or live upon the scanty doles of 
charity ; traders and manufacturers must go through the 
Bankruptcy Court, until the gradual diminution of this 
accumulation of goods once more allows the wheels of 
industry to revolve and labour to be employed. 

It is not here asserted that this under-consumption is 
the only possible reason for commercial and industrial 
crises. There have been crises which owed their origin 
to the fact that more capital than could be spared for the 
purpose had been invested in processes of long duration, to 
the neglect of the more immediate wants of the community. 
But such crises have been rare. The vast majority of 
these disturbances are due to the cause here described, and 
they are becoming more and more frequent. Nor can it 
be otherwise. Every such crisis, in weeding out weaker 
competitors, favours the concentration of wealth in fewer 
and ever fewer hands. Every such increase of concen- 
tration adds to the amount of wealth that will be saved 
unnecessarily, by reducing the draft upon this wealth 
through the consumption of its possessors and their con- 
tribution to the revenue of the State, and must consequently 
hasten the advent of the next crisis. 

These convulsions, however, merely mark the culmina- 
tion of forces constantly at work, just as earthquakes or 
volcanic eruptions are the result of seismic forces constantly 
active. For even during the interval between two crises, 
even during those periods of feverish industrial activity 
which now and then arise, much capital and many labourers 
remain unemployed. The tendency towards under-con- 



i6o DEMOCRACY VERSUS SOCIALISM partii 

sumption once established, imposes caution upon the 
employers of labour. Only the more active and reliable 
labourers are employed at any time, and every crisis adds 
to the number of those no longer in the race. Simul- 
taneously a number of workers are employed for part of 
the working time only, and the increasing difficulty of 
finding profitable investment for savings adds to the 
number of both classes even in times of comparative 
prosperity. 

This, then, is the sequence of events. The creation of 
legal monopoly-rights concentrates wealth in the hands of a 
comparatively small class through the tribute which these 
rights enable them to impose upon the wealth-makers ; 
the consequent reduction in the consumptive power of the 
majority of the people is not compensated for by either 
the consumption or the savings of the appropriating classes ; 
hence arises under-consumption, scarcity of employment, 
the rise of an ever-increasing unemployed class, and those 
recurring industrial convulsions which we term commercial 
crises. To the creation of legal privileges, especially to 
the privilege of private ownership of the only source of 
wealth, the land upon and from which all men must live, 
must, therefore, be traced the industrial and social injustice 
which disfigures our civilisation, and not, as Socialism posits, 
to the private ownership of real capital and the private 
conduct of non-privileged industries. 



CHAPTER XI 

THE COMPONENT PARTS OF SURPLUS-VALUE 

The foregoing examinations prove, that surplus-value is 
not a homogeneous body, as Socialism posits, but a com- 
pound of several elements, differing widely in character, 
viz. : — 

Natural Renty the result of the extension of labour in 
space. 

Natural Interest^ the result of the extension of labour 
in time. 

Spurious Rent J arising from the creation by the State of 
private ownership in land. 

Spurious Interest^ arising from the creation by the State 
of other monopoly-rights. 

Profit, a secondary result, arising from the creation by 
the State of land and other monopolies. 

In their origin, these five integral parts of surplus- 
value fall thus into two categories, viz. those arising from 
natural law, and those arising from the corporate action 
of human society. In their influence upon society and 
the distribution of wealth, however, they fall into three 
classes, viz. : — 

Natural Rent, as being no part of the product of 
individual labour, and, therefore, forming no deduction 
from individual wages, but being part of the common 
labour and wages of the whole community. 

Natural Interest, as being no part of either individual 
labour or of that of the community as a whole, but a 
natural increment which the capitalist acquires only in so 
far as he renders services by exchanging goods of present 

M 



1 62 DEMOCRACY VERSUS SOCIALISM partii 

high utility for goods which will acquire such utility at a 
future date. 

Spurious Rent, Spurious Interest, and Profit, being part 
of the product of individual labour and deducted from 
the wages of labour without any service being rendered in 
return. 

Arising from natural law, natural rent and natural 
mterest never can become the property of individual 
labourers as labourers. Natural rent must always go to 
the owner of land, and natural interest to the owners of 
capital. No action which human societies may take can 
alter the immutable laws of nature. All that human 
enactments can do, is to change the ownership of land 
and capital, so that rent and interest may be reaped by 
the new owner or owners. When, therefore. Socialists 
demand the abolition of rent and interest, they demand an 
impossibility. The adoption of their industrial programme 
to its fullest extent, the ownership of all land and capital 
and the conduct of all industrial operations by the State, 
would utterly fail to abolish rent and interest ; all it could 
do would be to change the incidence of ownership in rent 
and interest. 

The rent of all agricultural and mineral land, as well as 
that of factory sites, would pass into the hands of the State 
by virtue of their being used as well as owned by the State ; 
but unless the State continued to charge rent for the more 
desirable residential areas, such rent would still be received 
by those private persons who were permitted to use them, 
in the advantage which they would enjoy over others. 

Interest would similarly continue to arise, and if the 
State did not itself absorb it in some way for the equal 
benefit of all — ^which will be shown to be impossible — it 
would pass into the hands of some of the people only, those 
engaged in the primary stages of every productive process. 
Moreover, while the latter method would eventually result 
in a reduction of the wealth which could be distributed to 
and consumed by the mass of the people, the former, the 
charging of interest by the State, even if it could be done, 
would not necessarily lead to any increase of wealth avail- 
able for the consumption of the whole people. For with 



CH. XI COMPONENTS OF SURPLUS-VALUE 163 

growth of population arises the necessity for a continuous 
increase in the amount of capital. This increase is at 
present provided mainly out of that part of the annual 
product of industry which constitutes surplus-value. If 
the State becomes the only capitalist, the annual increase 
of capital will have to be provided for out of the annual 
product of industry just the same, and may, not unlikely, 
be equal to the sum of natural interest now going to the 
owners of private capital. Even, therefore, if the total 
product of the national industry were not diminished by 
the substitution of State officials for private organisers of 
industry, the deduction of new capitd from this product 
would leave no more, or little more, available for general 
consumption in the most favourable but impossible case, 
the reaping of interest by the State. When, however, the 
State leaves interest in the hands of some of the people, 
and at the same time prevents them from using it as 
capital, which under Socialism is the only alternative, the 
deduction of a further amount from the product of industry 
for providing the necessary new capital must by so much 
reduce the amount of wealth available for distribution and 
consumption, and must, therefore, largely reduce the well- 
being of all labourers engaged in the final processes of 
production. 

It has been shown that the landowner, receiving rent 
for the use of opportunities which are available without 
his existence, and to the creation of which he has either not 
contributed at all or only as much, when a labourer, as 
every other labourer, has not rendered and does not 
render any service for the wealth which he is allowed to 
appropriate. On the other hand, it has been made equally 
clear that the capitalist, as capitalist, and apart from any 
services which he may render in the actual organisation of 
industry, receives natural interest for services which he 
renders, and which are of the utmost importance. In 
subsequent chapters it will be shown that such service 
cannot be rendered by State officials with similar efficiency, 
if at all. Apart from this question, however, seeing that 
such services are rendered, the enjoyment of the reward by 
those who render them fundamentally differentiates natural 




1 64 DEMOCRACY VERSUS SOCIALISM partii 

interest from natural rent. The possession of the latter 
by private persons, its withdrawal from the common posses- 
sion of the social body as a whole, constitutes a series of 
ever-recurring and increasing acts of injustice to the mass 
of the people. The enjoyment of natural interest by 
private persons withdraws it from no one who has any title 
to it, and therefore inflicts no injustice. 

Moreover, while it has been shown that the private 
possession of capital and interest inflicts no injury on the 
social body, it has been equally shown that the private 
ownership of land and the private possession of rent, as 
well as that of other monopoly rights and tributes, does 
inflict such further injury by the augmentation of surplus- 
value through deductions from the wages of individual 
labourers, viz. Spurious Rent, Spurious Interest, and Profit. 
All these have been shown to arise, not from private 
ownership of capital and the private conduct of non- 
privileged industries, but from the creation by the State 
of private ownership in land and other monopoly-rights ; 
and, further, it has been shown that, while rent increases 
with the progress of society, the rate of interest declines as 
social conditions are improved. 

For all these reasons a sharp distinction must be drawn 
between these two kinds of property, their social influence 
and ethical validity. While private property in one is 
wholly justified, not injurious, and may be of incalculable 
value to the weUbeing of society, private property in the 
other is wholly unjustifiable, injurious in itself, and pro- 
ductive of vast secondary injuries. On economic grounds, 
those mainly considered in the foregoing examinations, 
therefore, the appropriation by the State of rent — which, 
as wiU be shown, carries with it the abolition of private 
ownership of land, but not that of its private possession 
and use — and of those industries which cannot be carried 
on by private persons without the grant of special privi- 
leges by the State, as well as the abolition of all other 
monopoly-rights, is urgently called for by the vital in- 
terests of society ; while, on the same ground, the appro- 
priation of capital and interest by the State, and the State 
conduct of non-privileged industries, is wholly indefensible. 



cH.xi COMPONENTS OF SURPLUS-VALUE 165 

That ethical considerations lead to the same conclusions 
will be more fully shown in the succeeding division of this 
work, Part III. 

The economic conceptions, which serve as the scientific 
basis for the industrial proposals of Socialism, are, therefore, 
shown to be unscientific and untenable. Distinctions 
which are of vital importance are disregarded ; accidental 
similarities are mistaken for proof of congruity ; things 
essentially difi!^erent are treated as of the same kind, and, as 
a consequence, the cause of existing economic evils is sought 
for in a false direction. The defects from which these con- 
ceptions suflPer and which invalidate them are : — 

1. Drawing no distinction between real capital, the 
produce of labour from land, and mere monopoly-rights, 
the creation of legislative enactments. 

2. Regarding surplus-value as a homogeneous mass, 
consisting wholly of tribute levied from the product of 
labour. 

3. Regarding productive labour as the only title to 
the possession of wealth, thus disregarding the fact that 
the voluntary transfer of wealth by its producer for service 
rendered gives a valid title to him who has rendered the 
service. 

4. Regarding all capital as the result of theft, and 
attributing the power to exploit labour to the private pos- 
session of capital. 

5. Regarding the present pathological condition of 
competition as its physiological condition, a conception the 
erroneous nature of which will be further demonstrated in 
the next chapter. 



CHAPTER XII 



COMPETITION 



In former chapters it has been shown that the socialist 
contention of the failure of competition, the assertion that 
the inherent tendency of free industry is towards the dis- 
placement of competition by monopoly in so far as 
employers are concerned, is a delusion. It has been 
proved that nearly every kind of monopoly can be traced 
to some form of legal restriction, to legislative interference 
with the eaual rights of all men, by the creation of special 
privileges for some, i.e. to legal limitations of competition. 

There remains, however, the further contention, that 
industrial competition, jua competition, is the cause of the 
exploitation and degradation of the labouring masses, a 
contention which challenges an inquiry into the nature and 
function of competition. No such inquiry has ever been 
instituted by socialists, who content themselves with assert- 
ing the inherent wickedness of the competitive process. 
Yet such an inquiry alone can determine whether the evils 
which to-day result from competition are due to competi- 
tion as such, and are ineradicable, or whether they result 
from some interference with competition, and can be 
eradicated by the removal of such interference. 

That competition is not an arbitrary human invention, 
but an inherent necessity of life, is shown by the fact that 
it secures the maintenance and evolution of life throughout 
all nature. The welfare of any organism depends upon a 
due proportion between its several structures and their 
respective functions, and this due proportion is secured by 
the competition of the several structures for nutriment. 



CHAP. XII COMPETITION 167 

Every structure receives a supply of blood in proportion 
to its activities. If the performance of function is defec- 
tive, the supply of blood which it receives falls off and the 
structure deteriorates ; if the performance of function in- 
creases, the supply of blood increases and the structure 
develops. This competition of the several parts of an 
organism for nutrition, therefore, secures that balance 
between the relative powers of all its structures on which 
depends the efficiency of the entire organism, as well as 
that constant adjustment of structures — some dwindling, 
others growing — by which the organism adjusts itself to 
changes of conditions. 

This principle of self-adjustment through competition 
within each individual is paralleled by the principle which 
enables a species as a whole to adjust itself to the condi- 
tions under which the life of its members must be carried 
on. For this adjustment likewise depends upon each 
individual being supplied with food according to the 
activities which it puts forth. Only if the individuals 
whose structures and consequent activities are best fitted 
to surrounding conditions receive larger benefits, and those 
less fitted receive smaller benefits or sufl?er greater evils, 
can there arise the survival of the ofl?spring of the best 
fitted, inheriting these parental traits by which the ultimate 
adjustment of the whole species is secured. This adjust- 
ment, therefore, depends upon a competition of individual 
with individual, similar to the competition of structure 
with structure within each individual, by which reward is 
proportional to merit, leading to the ultimate extinction of 
those least able to compete. 

Likewise the evolution of lower types into higher 
types is made possible only by due apportionment of 
reward to merit through competition. Variations of 
structures can become fixed only when they are service- 
able, i.e. if they secure to their possessors a better chance 
of obtaining food or safety, and, consequently, of leaving 
ofl&pring similarly varying from the original type. For 
the better nutrition, prolonged life, and greater power of 
propagation which come to the members of the more 
highly evolved species, lead to the displacement of 



1 68 DEMOCRACY VERSUS SOCIALISM partii 

similar species the structures and consequent faculties of 
which are less adapted to their needs. Once more, there- 
fore, competition, securing due reward to merit, subserves 
the purpose of life, by causing the development and 
securing the persistence of attributes, physical, mental, 
and moral, which distinguish higher types from lower 
types. 

Throughout the industrial part of human society, 
competition achieves a kindred apportionment of reward 
to merit, securing kindred results. A vital difference, 
however, must be pointed out. While merit in sub- 
human species consists mainly of self-subserving activities 
in the relation of unmated adults with each other, merit 
in the industrial relations of men in the social state consists 
solely in other-subserving activities. For the essence of 
the social state is that voluntary co - operation which 
results from the exchange of service for service ; and the 
meritoriousness of any industrial act, therefore, is measured 
by the amount of service which it affords to others. 
Merit consisting in service, the reward of merit in the 
social state, must, therefore, be proportioned to service 
rendered. That any industrial agency — industry, trade, 
or profession — flourishes or decays under the stress of 
competition according to the degree in which it supplies 
felt wants, i.e. renders services, needs no proof. What 
needs to be proved here, because generally overlooked by 
socialists, is, that under the stress of competition every 
industrial agency is impelled to put forth the greatest 
activity, i.e. render the greatest service in return for the 
reward which it receives ; as also, that within each of these 
agencies competition impels every individual to do the 
same, and allots to each of them a reward equal to the 
services which he renders. 

Two kinds of industrial competition are conceivable. 
One is that in which the number of prizes is smaller than 
the number of competitors, and where, therefore, some com- 
petitors cannot obtain any prize. In the other, the number 
of prizes is equal to the number of competitors, but the 
prizes vary in value, and competition, therefore, merely 
determines the value of the prize which shall fall to each 



CHAP. XII COMPETITION 169 

competitor. Both these forms of competition are in 
existence. 

Architectural competition furnishes an example of the 
first kind. A public building is to be erected and a prize 
is offered for the best plan. One architect only can gain 
the prize, yet nothing but good results from this, the 
most onerous kind of competition; for not only are all 
the competitors stimulated to the exertion of their artistic 
faculties, but the object for which the competition is 
instituted, the best plan, cannot be attained with similar 
certainty by any other method. 

The second kind of competition, that in which com- 
petition merely decides the value of the prize which shall 
go to every one of the competitors, and in which no single 
competitor need go without a prize, while obviously less 
onerous, is of far greater importance. In order to fully 
and clearly elucidate the principles which determine this 
form of competition under natural conditions, it is 
advisable to study its action as it operates on various 
classes. 

Every medical man is constantly competing with other 
medical men as to which of them shall gain the con- 
fidence of the greatest nimiber of patients. He to whom 
the greatest number give their confidence will be able to 
charge the highest fees and to coUect the most remunera- 
tive practice. But the fact that the services of one 
surgeon or physician are valued by the public at ^ i o,ocx) 
a year, does not prevent other surgeons or physicians 
from earning an income. The income of every medical 
man is determined by the competition of doctors for 
patients and patients for doctors, and is exactly equal to 
the value which the public places upon the service which 
each of them can render. 

The community, however, wants the services of a 
limited number of doctors only, and nobody can tell what 
this nimiber is. When disease is rife more doctors are 
wanted than at times when the state of public health is 
normal. Some doctors, therefore, may earn a decent 
income sometimes, while at other times they wiU fail to 
do so, and these will be precisely those doctors on whose 



I70 DEMOCRACY VERSUS SOCIALISM partii 

services the public places the least value. If there are, 
however, more medical men than the public wants at any 
time, those whose services are regarded as least valuable 
never can make an adequate income as medical men. 
These, therefore, will be compelled, sooner or later, to 
devote their faculties to the rendering of some other 
service which the community requires, and for which these 
fit them better than for the practice of medicine. 

What is true of medical men is equally true of all 
professions in the absence of monopoly. In the long-run 
every professional man will be paid in accordance with the 
value which the community places on his services ; those 
whose services are regarded as least valuable and are in 
excess of public requirements will have to leave the 
profession in which their services are not required, and 
will enter on some occupation in which they are useful ; 
the community is assured of always receiving the best pro- 
fessional service which can be rendered ; and the mechanism 
which assures these beneficial results — results which could 
not be obtained in any other way — is competition. 

If it be now objected that the judgment of the com- 
munity is not always right, that among Qie professional men 
whose services are accepted there may be some less fit than 
some of those whose services are rejected, the objection 
must be admitted to be true. That a human agency is 
not perfect, however, will not cause it to be rejected by 
reasonable men, unless a more perfect agency is av^able. 
Which is the agency more perfect as a selector than the 
estimate of the whole community ? If it is replied that 
this more perfect agency is a governmental body, socialistic 
or otherwise, the obvious answer is, that the units com- 
posing this body must themselves be selected by the 
community ; that if the judgment of the community is 
unreliable when each man deals with what directly 
concerns his own welfare, it must be infinitely more 
unreliable when each man deals with what only indirectly 
affects his own welfare, i.e. when all join in the selection 
of the men who are to select all the professional and other 
men who shall supply public wants. Competition, there- 
fore, while not infallible, is yet far less fallible than any 



CHAP. XII COMPETITION 171 

socialistic substitute in the selection of the fittest men for 
the services expected of them. 

The principles set out above also guide the competition 
of other classes. Take that of manufacturers, and as an 
example that of manufacturers of boots. The one who 
produces the best boots at the lowest price, i.e. who 
renders his services against the smallest sacrifice on the 
part of the community, will, in the long-run, have the 
largest output, and will earn the biggest income. Un- 
fortunately for the community, however, he cannot supply 
all the boots required. Therefore other and inferior 
manufacturers must be employed. These will earn in- 
comes less than that which falls to the best manufacturer, 
but which in every case correspond to the value which the 
public places upon their services. If, however, there are 
more boot -manufacturers than the community requires, 
some must go without incomes, or must devote themselves 
to some other occupation in which their services are 
required. The men so weeded out wiU in the long-run 
be the least capable manufacturers of boots. Here again 
it is competition which secures to the community the best 
service, and which transfers to useful occupations those men 
who otherwise would lead lives useless to the community. 

These considerations obviously apply with equal force 
to all manufacturers, merchants, shopkeepers, farmers, and 
other employers of labour. They, however, are no less 
applicable to their employees, workers for salaries or 
wages. As an example, boot-operatives may be selected. 
The community wants each year a certain but varying 
quantity of boots. Therefore a certain number of 
employers set up boot-factories and want a certain number 
of operatives to assist them in making boots. They offer 
a certain wage to attract these operatives. Three cases 
are possible under natural conditions. If the wages 
offered are lower than those ruling in other industries 
requiring similar skill, the number of operatives attracted 
to the boot-factories will certainly be insufficient to supply 
all the boots required. If equal wages are offered, the 
number may still fall short of requirements. Higher 
wages will attract a sufficient number. 



172 DEMOCRACY VERSUS SOCIALISM partii 

As long as the number of operatives is less than, or 
just equal to, the requirements of the market, there will 
be produced less than a sufficient or just a sufficient 
quantity of boots, and the competition of buyers for 
boots will be greater or equal to the competition of boot- 
sellers with each other. In the former case prices will 
rise, factories will be enlarged or increased in number, 
more operatives will be required, and wages will rise. In 
the other case prices will be stationary, and so will be the 
demand for and the wages of boot-operatives. The only 
competition which in both these eventualities can exist 
among boot -operatives is, as to which of them shall 
render greater services and earn higher wages than others, 
but none of them need go without wages in the boot- 
trade. Competition merely assures the result that reward 
shall be commensurate with services rendered. 

Suppose, however, that either through a miscalculation 
as to the number of boot-operatives required, or through 
the introduction of labour-saving apparatus, the number 
of the former exceeds the requirements of the community. 
In that case some operatives will be compelled to leave the 
boot -trade and to enter upon some other occupation. 
Who shall these be, the best or the worst bootmakers ? 
The interest of the conmiunity manifestly requires that it 
shall be the worst, those least fitted to make boots. 
Competition again ensures this beneficent result. The 
worst operatives will be unable to obtain further employ- 
ment as bootmakers, and will, therefore, be compelled to 
render some other service which the community wants and 
for which they are better fitted than for bootmaking. 

So far the examination of competition has not revealed 
any evil results. This examination has, however, been 
made under the assumption of a condition which does not 
exist in the real life of to-day, viz. that all those who are 
in excess of the number required in any trade or profession 
will be able to find employment in some other occupation 
for which they are better fitted. This they undoubtedly 
could do, provided there were not enough labourers in 
some other occupations. When, however, this condition 
is absent, when the demand for labour generally falls short 



CHAP. XII COMPETITION 173 

of the number of men seeking employment, some men 
will be unable to find employment anywhere, and the 
conditions under which competition proceeds are thereby 
profoundly altered. Observe, however, that it is not 
competition which has caused this scarcity of employment, 
but that, on the contrary, it is this scarcity of employment 
which produces the alteration in the character of com- 
petition which now must be investigated. 

So far competition has been seen to produce these 
results : — 

(a) To assure to the community the best services in 
the satisfaction of its wants with the least sacrifice on its 
part. 

(i) To secure to every worker a reward commensurate 
with the value which the community places on his services. 

(c) To weed out of every trade and profession the 
men whose services therein are superfluous and least 
valuable, and to transfer them to occupations where their 
services are more valuable to the community. 

If, however, no other occupation is open to the men 
so weeded out, all this will be profoundly altered. For 
in that case, instead of leaving the trade in which they are 
superfluous, these men are compelled to underbid labourers 
better fitted for the work than themselves. If, for in- 
stance, the best worker in a trade is worth los. a day, 
and the worst worker actually employed 8s. a day, em- 
ployers will generally prefer the los. man, if these wages 
are insisted upon. If, however, some unemployed man, 
nearly equal in efficiency to the worst man actually 
employed, oflFers to work for 6s. a day, the wages of 
these other labourers must fall to, at the highest, 6s. 6d. 
and 8s. 6d. respectively, or the inferior labourer will be 
the cheapest worker. This competition of workers who 
under existing conditions cannot be employed, now re- 
duces the wages of all workers. But inasmuch as the 
employment of labour is principally determined by the 
consumption of that vast majority which labours for 
wages, it follows, that every reduction in wages, reducing 
consumptive power, must still further reduce the oppor- 
tunities for the employment of labour. Competition has 



174 DEMOCRACY VERSUS SOCIAUSM partii 

now ceased to be beneficial ; it now is a scourge which 
flays the backs of the vast majority of mankind, and 
which, unless it were counteracted by other tendencies, 
would speedily reduce them to a state of abject poverty. 

Yet, to regard this result as a cause ; to saddle- com- 
petition with the consequences which flow from scarcity 
of employment ; to demand the abolition of competition 
instead of demanding the abolition of the causes which, 
by creating scarcity of employment, distort the action of 
competition, is a manifest absurdity. 

State-created monopoly, which has been shown to be 
the cause of low wages and of consequent scarcity of 
employment, is the dam which has been erected across the 
stream of industry, the waters of which, directed by the 
force of competition, would otherwise bring fulness and 
plenty everywhere. 

To rail at the failure of the distributive machinery to 
fulfil its purpose, when that failure, unjust distribution, is 
obviously due to interference with this machinery, is pure 
childishness ; more childish still is it to prescribe further 
interference as a remedy for the evils arising from existing 
interferences. Abolish the dam of State interference with 
men's equal rights, the special privileges accorded to some> 
and competition, restored to its normal condition, will 
distribute the fruits of industry to the door of every one 
who takes part in it in proportion with the services which 
he renders, and will raise the reward of each to the highest 
point which the existing skill, knowledge, and industry of 
mankind makes possible. 



k 



PART III 



ETHICS 




CHAPTER I 

THE DENIAL OF NATURAL RIGHTS 

The fundamental ethical conceptions of Socialism we 
found to be as follows : ^ — 

The denial of abstract or natural rights of individual 
members of the State, and the consequential assertion that 
all individual rights are granted by the State, which may, 
therefore, alter or cancel existing rights or grant new 
rights ; the sole consideration which ought to guide the 
State in dealing with rights of individuals, being, "the 
balance of social advantages." 

The first and second of these propositions are clear cut 
and need no further elucidation. It is, however, different 
with the third proposition, for it is by no means clear 
what is meant by " the balance of social advantages," or 
how that balance is to be ascertained. 

There can be no doubt as to the body to be entrusted 
with the determination of the direction in which the 
balance of social advantages lies. Socialism confides this 
duty to the majority of adult individuals, for majority- 
rule is one of its fundamental tenets. Nor is there any 
doubt as to the manner in which the majority is to arrive 
at its decision. The existence of natural rights being 
denied, no general principle for the guidance of the 
majority is available, nor can there be any limit to its 
action. The question whether a particular measure, say 
the legalisation of infanticide, will produce greater social 
advantages than disadvantages, can, therefore, be decided 
in no other way than by the process of estimating the 

1 See Part L chap. iv. 
N 



178 DEMOCRACY VERSUS SOCIALISM part in 

advantages or disadvantages, proximate and remote, which 
may result from this particular act. If a majority, having 
thus empirically investigated the question, has formed a 
favourable opinion of the measure, it ought to be adopted. 
The question of right or wrong cannot arise. For inas- 
much as natural rights, such as the right of infants to life, 
are denied, that only is right which the majority for the 
time being has empirically adjudged to be socially advan- 
tageous ; and wrong is only that which the majority for 
the time being considers to be socially disadvantageous. 

Coming now to the meaning of the proposition itself, 
two ideas are obviously contained in it. One is, that 
measures may be partly advantageous and partly disad- 
vantageous to society, and that they ought to be adopted 
if the foreseen advantages exceed the foreseen disadvan- 
tages. The other is, 3iat a majority of the people can 
empirically determine all the sequences, proximate and 
remote, of the enforced application of any proposal. 

The question still remains in what direction lies the 
advantage of society. Society itself is not a sentient being, 
capable of feeling pleasure and pain. Sentiency, the 
feelings of pleasure and pain, is confined to its constituent 
parts, the sentient beings which compose it, individual 
human beings. Hence, the welfare of society, considered 
apart from that of the units which compose it, is not an 
end to be sought. Society exists for the benefit of its 
members, not the members for the benefit of society. 
Society as such, therefore, can have no claims, except in 
so far as they embody the claims of the component 
members of society ; social advantage or disadvantage 
has no meaning except in so far as the advantage or 
disadvantage of its members, present and future, is con- 
cerned. 

The real meaning of the term, therefore, is, either 
that the majority must guide each of its acts empirically 
in the direction of securing advantages to the majority, 
even if it thereby inflicts disadvantages on the minority ; 
or in the direction of securing to all greater advantages 
than disadvantages. 

One more question, however, remains to be solved, 



cH.i THE DENIAL OF NATURAL RIGHTS 179 

viz. in what direction is the advantage or disadvantage of 
the individuals constituting society to be sought ? Is it 
in the direction of increasing the sum of misery ; or is it 
in maintaining a state of indifference by an exact balance 
of misery and happiness ; or is it in increasing the sum of 
happiness, that social advantage is to be sought ? No 
injustice will be done to socialists if it is concluded that 
they consider social advantage to lie in increasing the sum 
of happiness existing within the society, and social dis- 
advantage to be equivalent to the increase of the sum of 
unhappiness. 

The statements here investigated, therefore, resolve 
themselves into the following assumptions : — 

That it is the duty of the State, acting through a 
majority of adult citizens, to secure the greatest possible 
sum of general happiness. 

That this greatest sum of general happiness can be 
secured by empirical considerations of the sequences, 
proximate and remote, of any governmental act. 

That there exists no general law, deducible from the 
nature of men and of their environment, by which the 
influence of governmental acts on the sum of general 
happiness can be measured. 

Three methods of testing the validity of these postu- 
lates are available. We may try to discover whether they 
are really articles of socialistic belief, or whether socialists 
merely endeavour to persuade themselves that they believe 
in them ; and we may submit them to the test of deduc- 
tion and induction. The present chapter will be devoted 
to the first two of these examinations, while subsequent 
chapters will deal with the third. 

Men having no natural rights can have no natural 
right to happiness. If men have no natural right to 
happiness, it cannot be the duty of the State to secure 
their happiness. The State may endeavour to do so as a 
matter of grace ; but it cannot be bound to continue to 
do so, and, if it thinks fit, may devote its acts to the 
furtherance of their unhappiness. In assuming that it is 
the duty of the State to further the happiness of its 
members ; in laying down the doctrine that the acts of 



i8o DEMOCRACY VERSUS SOCIALISM partiii 

the State ought to be guided towards the increase of 
happiness, socialists, therefore, admit a natural right to 
happiness in the individual members of the State. 

Likewise, if the right to individual happiness is assumed 
to be not natural, but given by the State, the State can 
withdraw not only the happiness, but also the right to it. 
Having power to abolish the right to happiness, the State 
cannot labour under the duty or securing happiness. The 
right to happiness, therefore, cannot be given by the State, 
and must be a natural right antecedent to the State. The 
socialists' postulate, that it is the duty of the State to secure 
happiness, therefore, is contradictory of the other socialistic 
postulate that there are no natural rights. It need not be 
pointed out that the cogency of this reasoning is not 
afFected by the substitution of either misery or indifference 
for happiness as the ultimate object of State action. As 
long as it is postulated that the action of the State ought 
to be guided by any principle, it is tacitly admitted that 
there are individual natural rights ; for the obligation on 
the part of the State can have no other origin than in the 
possession of such rights by the individuals composing it, 
as are not derived from and, therefore, cannot be abolished 
by the State. 

A further contradiction of the denial of natural rights 
will be found in the claim for the rule of the majority. 
Socialists passionately urge the right of the majority to 
impose its will on the minority in all common affairs. 
This right of the majority cannot, however, be a right 
granted by the State ; for if it exists, it must be ante- 
cedent to the State, otherwise the State would be justified 
in abolishing it. As a matter of fact, the right is not yet 
fully recognised in any State in which Upper Houses, not 
elected by a majority of the people, possess the right of 
vetoing any legislative act, notably Great Britain and 
Germany. In these countries, therefore, the right of the 
majority to rule has not been granted by the State, and, 
therefore, according to one socialistic doctrine, the people 
of these countries do not possess the right to majority- 
rule. As Socialism nevertheless claims that they possess 
this right, it thereby admits that majority-rule is either 



cH.i THE DENIAL OF NATURAL RIGHTS i8i 

itself a natural right or deducible from individual natural 
rights. 

The following reasoning will prove the latter con- 
clusion to be the right one, the only possible basis being 
the equal right of all individuals to happiness. For if the 
acts of the State have any influence on individual happi- 
ness, and if some men have a greater right to happiness 
than others, a minority may possess a greater aggregate 
right to happiness than a majority, and may, therefore, 
possess a greater right to determine the conditions con- 
ducive to general happiness than the majority. The 
claim for majority-rule, therefore, implies the recognition 
of equal individual rights to happiness ; therefore it 
implies the recognition of individual natural right to 
happiness, and contradicts the denial of natural rights and 
the assumption that all rights are derived from the State. 

This self-contradiction by socialists is still more 
apparent in the following case. Justice consists of re- 
specting valid claims, and injustice of the infraction of 
valid claims, i.e. of rights. Only in so far as men are 
possessed of valid claims or rights can they be subject to 
just or unjust treatment. If all rights are derived from 
the State, if there are no natural rights, injustice can arise 
only from the infraction of rights granted by the State. 
The State itself, therefore, can neither act justly nor un- 
justly, either in granting rights previously denied, or 
in cancelling rights previously granted, or in resisting 
claims. For inasmuch as under this supposition there 
is no rule by which the validity of any claim can be 
gauged except the will of the State, it follows that no 
claim can be valid which is denied by the State. When- 
ever socialists, therefore, assert the injustice of existing 
social conditions and institutions, they contradict their 
own denial of natural rights. Yet, not only is this asser- 
tion of existing social injustice the basis or all socialistic 
theories, but it is also made in explicit terms. The follow- 
ing instances might be supplemented by many others : — 

** A woman inherits from nature the same rights as a 
man." ^ 



1 Bebel, JVoman, p. 122. 



1 82 DEMOCRACY VERSUS SOCIALISM part in 

" We might define the final aim of Socialism to be an 
equitable system of distributing the fruits of labour," ^ 
implying that the existing system is inequitable, i.e. unjust. 

" This then is the economic analysis which convicts 
private property of being unjust." * 

" Of these three phases of human injustice *' (chattel 
slavery, feudalism, wage-slavery) "that of wage-slavery 
will surely be the shortest." ^ 

Justifying murder as a means of resisting the legal 
infliction of torture and death by Russian officials, it is 
stated : — 

"It must be remembered that this is not a case of 
Socialism v. anti-Socialism, but of the most elementary 
rights of liberty and life."* 

"The phenomenon of economic rent has assumed 
prodigious proportions in our great cities. The injustice 
of its private appropriation is glaring, flagrant, almost 
ridiculous." * 

These quotations, as well as the preceding examinations, 
prove that socialists have not realised all that is involved 
in the denial of natural rights, and that their explicit 
denial does not prevent them from reasoning as if no such 
denial had been given. 

It is a justifiable assumption to suppose that socialists 
condemn murder and theft for other reasons than that 
they have been forbidden by the State. Yet if there are 
no natural rights to life and property, murder and theft 
would deserve reprobation only to the extent to which 
they are forbidden by law and where they are so forbidden. 
If the human race has passed through a stage of isolated 
individualism, like that of some predatory animals, the 
inherent badness of murder and theft would scarcely have 
been recognised during such period. When, however, the 
gregarious instinct awoke in man, the inherent badness of 
such actions could not remain concealed. For not even 
the least organised horde could remain together under 
conditions in which unprovoked murder and theft were 
not limited by sympathy, and without the sympathetic 

^ Kirkup, An Inquiry into Socialism, p. 105. ' Fabian Eisays, P* 23. 

' Ibid. p. 121. ^ Baz, The EtAics 0/ Sociaiism, p. 70. > Fabian Essays, p. 188. 



cH.i THE DENIAL OF NATURAL RIGHTS 183 

feeling of abhorrence there would not have arisen the 
public opinion which reprobates such actions within the 
horde. Weak as this sympathetic feeling may have been 
at first, necessary as it may have been to support its action 
by fear of retaliation, it is far different with civilised men. 
For as man becomes habituated to the social state and 
sympathy develops to a larger extent, murder and theft 
are no longer reprobated because the law of the State 
forbids such acts, but because they are in themselves 
repvdsive. The dictates of sympathy are then obeyed 
without any thought of acts of parliaments or penitentiaries, 
merely because the thought of the wrong inflicted upon 
others inflicts suffering upon self. This recognition of a 
wrong arising from the nature of the acts themselves and 
not from their prohibition, obviously implies the recogni- 
tion of corresponding rights, likewise not arising from the 
prohibition, but from natural relations. 

Though human societies differ widely from each other 
in type and development, they nevertheless have certain 
features in common. All of them recognise more or less 
fully certain rights ; the right to life and property being 
the most common. This is not only true of existing 
societies, savage, barbarian, civilised, and cultured, but is 
equally true of all past societies of which we possess 
records. Even in such a society as the Fijian, where the 
chiefs had acquired undisputed sway over the lives and 
property of commoners ; where certain tribes regvdarly 
furnished human victims for cannibal feasts ; where aged 
parents were killed by their own sons as a matter of 
course, — life and property were safeguarded by strict 
customs to which these infractions were recognised ex- 
ceptions. 

Moreover, these rights become more fully recognised 
in the ratio in which the organisation of any society is 
developed. The higher the type of the society, the more 
extensive and intensive is the recognition of these rights. 

The universal history of mankind, therefore, points to 
the conclusion that the recognition of human rights is 
advantageous to society, i.e. that it works good ; and 
conversely, that the non-recognition of human rights is 



1 84 DEMOCRACY VERSUS SOCIAUSM partiii 

disadvantageous, i.e. that it works harm. If this is ad- 
mitted, it must be equally admitted that there exists a 
causal relation between the acts of the State and their 
sequences, over which the State has no control. That this 
is admitted by socialists is shown in the absolute certainty 
with which they contend that the present policy of the 
State works harm, and that its adoption of a specified 
other policy will work good. Socialists, therefore, them- 
selves contend that the results which flow from govern- 
mental acts are not determined by chance, but that such 
sequences form part of the universal and unalterable causal 
relation between acts and their results. But if such causal 
relations do exist, then the action of the State ought to be 
guided by rules deduced from these unalterable causal 
relations. To revert to an illustration previously used. 
If the universal history of mankind proves murder to be 
harmful, the question whether infanticide shall be per- 
mitted cannot be usefully or safely decided by balancing 
the advantages and disadvantages which at a particular 
time seem to result from it in the opinion of one or more 
persons, but ought to be decided by the universal rule. 
The socialists* postulate that every action of the State, 
even those affecting the most fundamental rights of its 
members, ought to be guided by considerations of " the 
balance of social advantages," ignores the authority and 
even the existence of such universally true rules of conduct. 
It assumes that the social utility of every act is solely 
recognisable by its expected results ; that there is no 
possibility of knowing by deduction from fundamental 
principles the acts which must be advantageous and the 
acts which must be disadvantageous to the community. 

Nevertheless, such causal relation as is seen throughout 
nature is no less manifest in the relations of social life. 
Where justice is expensive or uncertain, or both, contracts 
are broken lightly and frequently; where violence goes 
unpunished, disorders increase ; where taxation is uncertain 
or unjustly apportioned, production is checked ; where 
property is insecure, no more than the necessaries of life 
will be produced ; where monopolies abound, wealth con- 
centrates in the hands of a few. 



cH.i THE DENIAL OF NATURAL RIGHTS 185 

In these as in all other cases the results which flow 
from acts do not depend upon the will of the State or of 
the ruling majority, and are unalterable by them. The 
State, therefore, cannot control the results of its acts ; these 
results are inevitably determined by natural law. How 
then can it be held that the acts of the State can confer 
rights ? If the State by sanctioning murder could improve 
the conditions under which social life is carried on ; if by 
sanctioning theft and fraud it could increase the production 
of wealth ; if by establishing private monopolies it could 
promote an equitable distribution of wealth ; that is, if the 
State could control the sequences of its acts, then the State 
could also create rights. But when it is seen that these 
sequences are beyond the control of the State ; that they 
are inevitable consequences of natural law, on which State 
law has no influence, and for the appreciation of which no 
empirical generalisation is necessary, no such proposition 
can be entertained. Rights are then seen to arise naturally, 
i.e. from the inevitable connection between cause and result 
which prevails throughout nature, and which imposes upon 
man the recognition of these rights. These are then seen 
to be natural rights, the denial of which, injuriously affect- 
ing life, individual and social, decreases the sum of aggre- 
gate happiness ; the recognition of which, beneficially affect- 
ing life, increases the sum of aggregate happiness. And 
it is further seen that though the natural social laws and 
the natural individual rights thence resulting are as eternal 
and unvarying as the physical laws of nature, their re- 
cognition, depending upon the experience of the race as 
embodied in its ethical perceptions, is a gradual process, 
similar to the ever-widening recognition of the unchange- 
able physical laws of nature.^ 

^ '* Hence there is really but one code of ethics and morals which has been and 
always will be as fixed and unchangeable as the forces of nature. But if, nevertheless, 
there have been temporary and local differences in ethical views, it is, first, because 
knowledge of nature has not everywhere reached the same stage of advancement, and 
men often yield to the grossest self-deception in respect of it ; secondly, because there 
are whole spheres of human life, like the social sphere, which on account of meagre 
knowledge are not considered natural, in which the sway of nature is not conjectured or 
presupposed." — Ludwig Gumplowicz, The Outlines ofSociology^ pp. 176, 177. 



CHAPTER II 



HAPPINESS OR JUSTICE 



Every structure of any organism and the corresponding 
functions which these structures subserve bear some 
relation to the needs of the organism. The evolution ot 
the structure proves the corresponding function to be an 
adjustment of the organism to the conditions under which 
its life must be carried on. The non-fulfilment, in normal 
proportion, of any function, therefore, causes the organism 
to fall short of the complete life which is possible to it. 
If the discharge of any function is neglected, the structure 
receives an insufficient supply of blood, which, if long 
continued, causes atrophy ; the consequent loss of power 
of the particular structure being accompanied by a 
corresponding deterioration of the organism as a whole. 
If the discharge of function is excessive, the increased 
waste is at first made good by an increase of blood-supply 
and corresponding hypertrophy of tissues. These com- 
pensatory movements, however, being limited in extent, 
further excess, leading to imcompensated waste, impairs the 
efficiency of the structure and injuriously affects the entire 
organism. 

During the evolutionary process, pleasurable sensations 
and emotions have, necessarily, become the concomitants 
of the normal discharge of functions ; while painful 
sensations and emotions have become the concomitants of 
deficient or excessive discharges. For adjustment to 
environment, subserved by the evolution of functional 
structures, could not have been achieved by organisms 
which habitually underwent painful sensations from normal 



CHAP. II HAPPINESS OR JUSTICE 187 

cUscharge of functions, and pleasurable sensations from 
their abnormal discharges. Likewise, organisms which 
experienced no sensations from the discharge of functions, 
normal or abnormal, could not have discharged their 
functions as efficiently, and would, therefore, have been 
less likely to survive than organisms whose discharge of 
functions was regulated by corresponding sensations. 

Every species, however, is subject to derangements of 
these relations through changes in external conditions. 
Normal discharge of particular functions, though pleasurable, 
may under these new conditions lead to the destruction of 
the species, while defective or excessive discharges, though 
painnil, may become necessary conditions of survival. 
Such derangements are, however, temporary ; for unless 
the normal relation is sooner or later re-established by such 
modification of structures as will lead to corresponding 
sensations being derived from the due or undue discharge 
of functions, the species will cease to exist. 

Mankind, no less than inferior creatures, is endowed 
with this relation between sensations and emotions on the 
one hand and the discharge of functions on the other. Nor 
is mankind exempt from the disturbance of these relations 
through changes in external conditions. On the contrary, 
as the change of such conditions has been exceptionally 
great and involved during the passage from savagery to 
the civilised state, the relation between sensations and dis- 
charge of functions has undergone exceptionally great 
disturbances in the case of civilised man. That his adjust- 
ment to the conditions of social life is not yet complete, is 
shown by the, as yet, incomplete relation between his 
sensations and the discharge of functions which the social 
state imposes upon him. In many cases actions which 
must be performed yield no pleasure, and actions which 
must be avoided yield no pain. Nay, in some cases, 
necessary acts actually cause pain and injurious acts cause 
pleasure. But with the further progress of man's adapta- 
tion to the social state these incongruities must diminish 
as they have diminished during like progress in the past, 
and with complete adaptation they must disappear. 

The sum of pleasurable sensations and emotions which 



I 

\ 



I 



1 88 DEMOCRACY VERSUS SOCIALISM partiii 



J arise from the normal discharge of all functions constitutes 

! happiness. Or, in other words, happiness arises from the 

; due exercise of all the faculties. For the only happiness 

we know of arises from the satisfaction of desires both 

f self-regarding and other-regarding. Desire, however, is 

I but the need for some pleasurable sensation or emotion, 

/ and pleasurable sensations and emotions are producible 

t only by the due exercise of some faculty. The satisfaction 

/ of desire being thus dependent upon the due exercise of 

) some faculty, happiness, the satisfaction of all desires, 

consists in the due exercise of all the faculties. The first 

requisite of happiness, therefore, is freedom to exercise all 

the faculties. 

/ In the social state, however, the sphere within which 

/ each can exercise his own faculties is limited by the spheres 

f within which others must exercise their faculties. If every 

man is to realise the greatest possible happiness, mankind 
must be so constituted that each of them finds due exercise 
for all his faculties within his own sphere, without encroach- 
ment on the spheres of others. This complete adjustment 
to social conditions does not yet prevail, inasmuch as 
occasionally painful sensations arise from limiting activities 
to one's own sphere, and pleasurable sensations from en- 
croaching on the sphere of others. It results from this 
mal-adjustment, that men are not yet capable of the full 
d^ree of happiness otherwise open to them. Nevertheless 
is it true that the greatest aggregate sum of happiness can 
only arise from a strict limitation of the activities of each 
by the like activities of all others. For whenever pleasure 
accrues to one through encroachment on the spheres of others, 
the resulting increase of happiness to the aggressor is less than 
the corresponding decrease of happiness to those aggressed 
upon. To their loss of positive pleasure, there is added 
the pain arising from the feeling of injury. Not only is 
the aggregate of present happiness thus reduced, but there 
results also a decline of future happiness. For every such 
encroachment disturbs and delays the further adjustment 
of character to social conditions, upon which the attain- 
ment of complete happiness depends. The fixed condition, 
under which alone the greatest aggregate sum of happiness 



CHAP. II HAPPINESS OR JUSTICE 189 

can be attained in the social state, therefore, is freedom of 
each to exercise all his faculties, limited by the like freedom 
of all others to exercise their faculties, i.e. justice, the 
recognition of equal natural rights. 

These considerations show that happiness is not some- 
thing which the State can distribute among its members. 
For no action of the State can endow every one of its 
members with the appropriate organisation which makes 
pleasurable sensations and emotions the concomitants of 
necessary actions, and painful sensations and emotions the 
concomitants of deleterious actions. Hence, any attempt 
to distribute happiness would produce deleterious results in 
various directions. By disturbing the balance between 
sensations and actions it would prevent the necessary 
further adjustment of men's organisation to the require- 
ments of social life. As the notion of State distribution of 
happiness necessarily implies the non-exercise of faculties 
otherwise exercised by individual men in procuring their 
own happiness, the happiness of each must be diminished 
to the extent to which these faculties remain unexercised, 
i.e. the attempted State distribution of happiness would 
result in a diminution of the aggregate sum of happiness. 
And further, as disuse of faculties tends to their deteriora- 
tion and ultimate disappearance. State distribution of 
happiness, if possible, would result in a diminution of 
individual faculties, and, therefore, in a reduction of 
individual capacity for happiness. 

Moreover, the idea of the State distributing happiness 
necessarily implies the further idea of proportionate distri- 
bution. What then is the proportion of happiness to be 
distributed to each ? If the answer is, that happiness is to 
be distributed in equal parts, the impossibility of the 
project is obvious. For nothing that the State can do can 
procure the same happiness for the antagonistic as for the 
sympathetic ; for the passive as for the active ; for the 
lethargic as much as for the excitable temperament. If, 
on the other hand, happiness is to be distributed unequally, 
the question arises. By what rule is the distribution to be 
guided ? Is it to be according to merit or to demerit ; or 
are the distributers to form an exact estimate of the capacity 



190 DEMOCRACY VERSUS SOCIALISM partiii 

for happiness of each member of the State, and then to 
apportion the available quantity of happiness accordingly ? 
Whichever of these courses is chosen, the impossibility of 
any distributers making even an approximately correct 
apportionment is obvious. 

There remains yet another difficulty. What is it that 
is to be distributed ? Happiness cannot be cut up and 
distributed in parts, nor can it be measured as cloth is 
measured by the yard. What then is meant when the 
claim is made that the State shall distribute happiness, as 
it is made in the socialistic contention that the State ought 
to be guided in its actions by nothing else than " the 
balance of social advantages," i.e. the measure of happiness 
which results from them. The only meaning which can 
be imported into the proposition manifestly is, that the 
State shall secure for its members the greatest means to 
happiness. 

Here again, however, it has to be recognised that no 
possible distribution of the means to happiness can secure 
the greatest sum of aggregate happiness. For if the dis- 
tribution of means is to be made in equal parts, as Socialism 
proposes, differences in age, sex, constitution, activity, and 
mental organisation, would result in some receiving more 
and some less than their greatest possible happiness re- 
quires. As a consequence, there would be a loss of 
aggregate happiness ; the sum of available means could 
procure a greater sum of aggregate happiness if it were 
distributed in some other way. If, on the other hand, it 
were contemplated to distribute the means to happiness 
unequally, the same impossibility of making the apportion- 
ment conform, even approximately, to any rule which 
may be adopted, is as manifest as it was found to be 
when a like distribution of happiness itself was considered. 

Seeing happiness itself cannot be apportioned ; seeing 
also that the distribution of equal means to happiness fails 
to secure the greatest possible aggregate sum of happiness, 
while no other distribution can be made ; it follows, once 
more, that considerations of happiness or social advantage 
offer no guidance to the State. The question, however, 
still remains, How can the State secure the greatest sum ot 



CHAP. II HAPPINESS OR JUSTICE 191 

aggregate happiness ? Manifestly there remains but one 
way : the State must secure to all the conditions under 
which each may obtain for himself the greatest amount of 
happiness, i.e. it must secure to all equal opportunities for 
the exercise of their faculties. Each must have as full 
freedom for the exercise of his faculties as is consistent 
with the equal freedom of all others. Therefore, once 
more we find, that not considerations of happiness, not 
" the balance of social advantages," but justice, the recog- 
nition of equal natural right, alone can guide the State so 
as to secure the greatest aggregate sum of happiness to its 
members. 

The same conclusion will be found to be inevitable 
when the question is approached in another way. Men 
have different standards of happiness ; not only men differ- 
ing in race, not only men differing in degree of civilisa- 
tion, not only men of the same race and civilisation, 
but even the same men at different periods of their lives. 
The qualities of external things as apprehended by us arc 
relative to our own organism, and, therefore, the feelings 
of pleasure and pain which we associate with such qualities 
are also relative to our own organism. This is true in a 
double sense, for these qualities of external things arc 
relative to the structures, as well as to the state of the 
structures of our organisms. Not only, therefore, is it 
true that "what is one man's meat is another man's 
poison," but also, that what is pleasurable at one time is 
panful at another to the same individual. The painful- 
ness of exercise, otherwise pleasurable, when the body is 
in a state of exhaustion ; the distaste for food, after a 
hearty meal, which would be keenly relished when hungry ; 
the agreeableness of a cold bath in summer, which in 
winter is shrunk from ; as well as the pleasure derived 
from a fire in winter, which in summer is oppressive, are 
but simple examples of this general relativity of pains and 
pleasures to structural states. 

All these circumstances render it exceedingly difficult 
for any individual to estimate the conduct which will 
ensure the greatest happiness of himself and of the mem- 
bers of his immediate family. Individuals, therefore, more 



192 DEMOCRACY VERSUS SOCIALISM part in 

and more, allow their conduct to be guided by ethical 
considerations, in the sure expectation that conduct so 
regulated is more conducive to happiness than conduct 
aiming directly at happiness. This difficulty of the 
individual, however, is infinitesimal compared with that 
of a governmental agency undertaking to determine the 
actions which will ensure the happiness of all the members 
of the State and of their descendants. Even when the 
latter element is disregarded — though it is obvious that 
the happiness of future generations is largely aflFected by 
present actions of the State — even when the happiness of 
living men and women alone is considered, the difficulties 
are insuperable. 

For the organisation of every individual diffi^rs in 
innumerable ways from that of all others and from that of 
the persons composing the governing agency. Therefore 
the kinds and degrees of actions which will ensure the 
greatest happiness of which each of them is capable, differ 
from those which will ensure the happiness of all the 
others, inclusive of that of the regulators. Nevertheless 
the latter must be guided by their own feelings in deter- 
mining the kinds, degrees, and sequences of the countless 
acts, the totality of which constitutes the happiness of 
the innumerable persons, all differently constituted from 
them and from each other, the happiness of whom they 
endeavour to ensure. 

While the difficulty of determining the conduct which 
will conduce to the greatest aggregate sum of happiness is 
thus insuperable, the like difficulty is seen to exist when 
the agencies by which such conduct must be applied are 
considered. For the object, individual happiness, and the 
agencies by which it can be attained are simple when 
compared with the infinite complexity of the object, 
general happiness, and its requisite agencies. Aiming 
directly at general happiness, the State would require 
numerous subordinate agencies, each composed of a gradu- 
ated body of numerous officials, most of them unknown 
to and unseen by the ruling agency, and acting upon 
millions of differently constituted individuals, equally un- 
known to and unseen by the rulers. Not only would the 



CHAP. II HAPPINESS OR JUSTICE 193 

conduct determined upon be coloured and deflected in its 
passage through these various agencies in ways which could 
not be foreseen, but its ultimate application would again 
be determined by the character of officials and of each of 
the individuals on whom it is enforced. Therefore, even 
if it were admitted that the State could better determine 
what is conducive to each individual's happiness than each 
can for himself, it would yet be impossible for the State 
so to shape its acts as to secure that happiness to each. 

Therefore, it is again seen, that the only conduct by 
which the State can procure the greatest aggregate sum 
of happiness, is to secure to all its members equal oppor- 
tunities for the achievement of their own happiness, i.e. 
equal opportunities for the exercise of their faculties ; that 
is, the State must be guided by no other consideration than 
that of justice. 

In further confirmation of this same conclusion, the 
consideration may be cited, that justice is a more intelligible 
aim than happiness. For justice is a question of quanti- 
tative measurement. Whenever an infraction of justice 
occurs, as when, in a case of individual theft or of that 
general theft which arises from monopoly, a benefit is 
taken while no equivalent benefit is given ; or when, as 
in breaches of contract, obligations discharged by one side 
are not discharged or not fully discharged by the other ; 
or when in the case of violence one assumes a greater 
freedom than the other ; or when the State itself confers 
privileges upon some of its members which cannot be 
equally conferred upon aU, — the injustice always consists 
in the disturbance of an equality and can be measured 
quantitatively. 

When, however, the object aimed at is happiness, no 
definite measure is available. Not only is the measure of 
quantity indefinite, but, differing from justice, a quantita- 
tive measure also is required and is equally indefinite. As 
an end to be achieved, happiness is, therefore, infinitely 
less definite and less intelligible than justice. 

Finally, the theory of " the balance of social advan- 
tages" implies the belief that the State can secure the 
greatest sum of aggr^ate happiness by methods framed 



194 DEMOCRACY VERSUS SOCIAUSM partiii 

directly for this purpose, and without inquiry into the 
conditions from which happiness arises. If it be held 
that there are no such conditions, one kind of action would 
be as effective in securing, happiness as any other kind of 
action, and, therefore, no balancing of advantages could 
be necessary or beneficial. If, on the contrary, it is 
admitted that there are conditions on the compliance with 
which happiness depends, then the first step toward happi- 
ness must be to ascertain these conditions, while the remain- 
ing steps required consist in compliance with the conditions 
ascertained. To admit this, therefore, equally condemns 
the balancing of advantages as a possible guidance, and 
admits that not happiness itself, but compliance with 
the conditions which ensure happiness, must be the 
immediate aim of the State, i.e. that justice must be its 
guide. 

Expediency, the guidance by expected proximate re- 
sults, proverbiaUy delusive when guiding individual conduct, 
is thus seen to be still more delusive when guiding collective 
conduct. The theory that there are no natural rights, 
that as a consequence the State may usefully shape, and 
ought to shape, its conduct by balancing expectations of 
social advantage against expectations of social disadvantage, 
is shown to be a shallow delusion. From whatever stand- 
point the question is approached, there results the con- 
viction, that, though there may be additional guidance for 
individual conduct, there is only one clear, safe, and infal- 
lible guide for collective conduct, the conduct of the State. 
That guide is justice, the recognition of equal natural 
rights inherent in every member of the State, and entitling 
each to equal opportunities with all others for the achieve- 
ment of his own happiness. 



CHAPTER III 

THE ORIGIN AND GROWTH OF LAW 

One more proof must be given to show that human rights 
are not derived from the State, but are inherent, the State 
merely recognising their existence as a necessary condition 
of its own existence and continuation. This proof is 
furnished by the history of human law. 

If rights are not natural, i.e. arising from the con- 
ditions under which life must be carried on in the social 
state ; if they are arbitrary gifts conferred on its members 
by the State, — they must be conferred through laws enacted 
by the State. Even if it could be shown that in every 
society, past and present, there existed a legal enactment 
corresponding to each recognised right, which manifestly 
is not the case even in our societies, the conclusion would 
not be justified that the right emanated from the law ; that 
it had no existence before the law granted it. For it is 
obviously possible that the law, instead of creating new 
rights, has merely recorded rights previously recognised, 
for the purpose that fixed scales of punishment for the 
infraction of such rights should ensure their more uniform 
recognition.^ But if it can be shown that till a com- 
paratively late period the State made no laws, and that> 

^ " The Common Law, which had its origin with the Judges, made the following 
presumptions in all actions between the State and the subject : — First, that all privil^es, 
such as personal liberty, freedom of speech, liberty to trade, right of public meeting, 
were the property of the subject and not the gift of the State " (p. lo). 

** Those charters of our liberties, Magna Charta, the Petition of Rights, and the Bill 
of Rights, are merely declaratory of the existence of these rights. . . . Hence, to the State 
British subjects owe none of the fundamental rights which some call natural " (p. 14). 

Attacks on Liheriy^ an address by Thomas J. Smyth, LL.B. ; Dublin UniTersity Press^ 
1890. 



196 DEMOCRACY VERSUS SOCIALISM partiii 

nevertheless, human rights were recognised, nay, that such 
rights were recognised before there was any State and any 
law of the State, then it is obvious that human rights are 
natural, i.e. that they antedate the State and are derived 
otherwise than from the State. 

The historical proofs that customs recognising rights to 
life and property are antecedent to the formation of the 
State, and that, till a comparatively late period, men failed 
to entertain even the conception that laws could be made 
by the State or any other human agency, have been 
furnished by a host of modern writers.^ The present 
chapter, dealing for the sake of brevity with European 
States only, is mainly founded on Professor Edward 
Jenks' valuable and interesting work. Law and Politics in 
the Middle Ages. 

The first records of Teutonic law consist of the 
compilations known as Leges Barbarorum of the sixth 
century. Several of these codes contain an account of 
their origin. Lex Salica, the code of the Franks, contains 
a prologue which describes the collection of its enactments 
by four chosen men (whose names and abodes are stated) 
after lengthy discussions with presidents of local assemblies. 
It also contains the following general observations on the 
manner of their origin : " Custom is a long habit founded 
upon manners ; it is founded upon antiquity, and an old 
custom passes for law." * 

Lex Gundobada, the code of the Burgundians, describes 
itself as a definition, and bears the seals of thirty -one 
Counts as witnesses, and the oldest code of the Alemanni 
is known as a Pactus or Agreement. 

These codes, therefore, are not laws newly made and 
imposed by some authority, but a collection of ancient 
tribal customs. This view, now generally admitted, is 
confirmed by the fact that they are not territorial laws, 
but laws of peoples. They show us the provincials of 
Gaul living under the Roman law, of which the conquerors 
made no attempt to deprive them. The Salic law specially 

^ '* Thus the comparative ttudv of law shomrd that rights arise historically in the 
collective or *folk mind.' " — Ludwig Gnmplowics, Tlu OutUnu of Sociology^ p. 91. 
' Alexander Sutherland, Origin and Growth of the Moral Senu, volume ii. 



CH. Ill ORIGIN AND GROWTH OF LAW 197 

refers to "men who live under the Salic law"; and the 
oldest part of Lex Ribuaria contains the following passage : 
"A Frank, a Burgundian, an Alemann, or in whatever 
nation he shall have dwelt, shall answer according to the 
law of the place where he was born. And if he be 
condemned, he shall bear the loss, not according to 
Ribuarian law, but according to his own law." ^ 

The time and circumstances which gave rise to these 
compilations are also not without bearing on the question 
of their character. Most of them are the outcome of the 
Teutonic emigration to Gaul, and coincide in date with 
the conquests of Charles Martel, Pepin the Short, and 
Charles the Great. 

The probable cause of their origin may, therefore, be 
found in the inevitable conflict between the desire of the 
conquerors to modify the laws of the conquered by the 
introduction of some of their own customs, and the 
resistance of the latter, as also in the necessity of reconcil- 
ing conflicting practices and providing for new conditions. 
Such conflicts and new conditions would make the precise 
formulation of claims obligatory, and would thus naturally 
lead to the compilation of the customs upon which the 
latter were founded. 

It is, therefore, an absolute certainty that these codes 
are not a collection of new edicts, but a collection of old 
tribal customs. The question, however, arises. How did 
these customs come into being ? were they the conscious 
invention of any governing authority, or the outcome of 
an unconscious growth, corresponding with the growth of 
the tribal society ? A short exposition of the organisation 
of Teutonic tribal societies will establish the truth of the 
latter conception, which, moreover, corresponds with the 
wider truth, fuUy established, that all primitive customs 
originate in the necessities of social life under the supposed 
sanction or command of tribal deities. 

At the beginning of our era the Teutonic peoples, as 
described by Csesar and Tacitus, were living in clans. 
The unit of the clan was the household, consisting not of 
one family, but of a cluster of families, the males and 

^ Law and Politia, p. 9. 



198 DEMOCRACY VERSUS SOCIALISM partiii 

unmarried females of which were descended trom the 
same ancestor. All the households constituting the clan 
also are descended, or believe that they are descended, 
from a common ultimate ancestor. Within the house- 
hold the housefather, generally the eldest male in direct 
descent, holds despotic sway, modified by ancient customs. 
The other members and the common property of the 
household are in his trust {mund\ and he alone speaks 
and acts for them. Within the household every member 
bears the responsibility for his individual acts, but to the 
outside world the members of the household are jointly 
responsible for the acts of each of its members. The 
injury of one is the injury of all, as the wrong done by 
one is considered a wrong done by all. The household 
acts and is acted upon as a corporate whole. 

In this limitation of the right of vengeance and 
liability for revenge to the members of the household, 
the blood-feud appears the first manifestation of public 
law. Anterior to it, the murder or other injury of one 
would be avenged by aU who were interested in the 
victim, upon all who were in any way connected with the 
aggressor. General slaughter, destructive of the fighting 
strength of the clan, was the result. In time there arose 
the custom of limitation to the members of the households 
to which both parties to the injury belonged, and this 
same idea is subsequently extended to offences against 
property. The area of revenge and re -revenge is thus 
limited, and the consequences of feuds are made less 
disastrous to the community. 

Nevertheless, the responsibility of the household is 
heavy ; for if one is injured and vengeance is taken, 
the feud is carried on by the household of the original 
aggressor as a sacred duty. Gradually the idea must have 
arisen that some real advantage received by the household 
in compensation for the loss or injury of one of its 
members would lessen the responsibility of each household 
and redound to the advantage of the clan. For the blood- 
feud weakens both households and the clan, while com- 
pensation enriches one of the households and prevents 
further weakening of the clan. Thus cases arise where 



CH. Ill ORIGIN AND GROWTH OF LAW 199 

compensation is ofFered and accepted. At first no doubt 
rare and applying to slight injuries only, these cases 
gradually multiply and extend to graver offences, until 
finally they harden into custom, and the payment of 
blood-money or " wer " habitually takes the place of the 
blood-feud. The housefathers, as elders of the clan, are 
the repositories of its customs. They, therefore, decide 
in each case what the compensation shall be, taking into 
account the nature of the offence as well as the status of 
the injured person. But there is no power to enforce their 
finding. If either the plaintiff or defendant refuses to 
acquiesce in their judgment the blood -feud takes its 
course. 

This is the stage of development at which Teutonic 
customs had arrived when the Leges Barbarorum were 
being compiled. They are principally concerned with 
minute and careful regulations of the compensation to be 
paid for offences. But they also make it quite clear that 
compliance is voluntary, and that the clan has neither 
executive nor legislative machinery. 

These fects prove the tribal customs, embodied in the 
Leges Barbarorum, to have grown and established them- 
selves independent of any official authority. The imme- 
diate successors of these compilations are the Capitularies 
or royal and imperial edicts issued by the Karolingian 
rulers and others. They mostly deal with comparatively 
unimportant matters, and it is doubtful whether their 
validity extended beyond the life of the ruler who issued 
them. In some rare cases **capitula" became true additions 
to the law of the time, but it must be remembered that 
they were a foreign importation imbibed by the rulers 
from the Roman law. 

During the gradual decay of the Frank Empire a new 
law grew up : the law of the fief or feudal law. The 
feudal lord administered the law of the fief — generally by 
deputy ; a law made by no legislator, but which during 
these troublous times had arisen through the mutual needs 
of the men of the fief and their lord. It is purely local, 
for any dispute as to what is the law of a given fief is settled 
by reference to the " greffe " or register of the court, and 



200 DEMOCRACY VERSUS SOCIAUSM part hi 

if this is silent, the men of the fief are called together and 
decide what the law is {enquete par tourbe). Certain 
general principles, nevertheless, run through the customs 
developed in each fief, and the right of appeal to overlords 
tends to produce a certain uniformity. Still the general 
truth is, that the court of each fief has its own home-made 
law. 

As the fief-law applied to men of the fief alone, other 
laws had to evolve for men who were not of the fief, such 
as priests and merchants. These laws also do not emanate 
from the State. 

The canon law originates in resolutions of general 
councils of the Church and papal decretals, considered as 
binding by the clergy, and which, supposed to embody 
the divine will, harmonise with primitive conceptions of 
the origin of custom and law. To these must be added 
ecclesiastical capitularies, issued by the Karolingian and 
other rulers, and similar regulations in which secular 
authority endeavours to restrict or enforce ecclesiastical 
claims. 

In time, however, the Church emancipates itself even 
from this slight interference of the secular power. The 
forgeries of Isidorus Mercator are followed three centuries 
later by the Decretum Gratiani, likewise a private work to 
which full authority is accorded, and is completed by the 
papal compilations beginning in the thirteenth century. 
The canon law, the binding force of which was not dis- 
puted, is thus, like the laws already considered, neither 
made nor administered by the State. 

It is similar with the law of merchants. The rise of 
more settled conditions during the eleventh century, and, 
still more, the Crusades, greatly stimulated commercial 
intercourse, which had almost disappeared during the pre- 
ceding period of anarchy. Neither the law of fiefs nor 
the elder folk-law contained provisions applicable to larger 
trade transactions. A new body of law had, therefore, to 
be evolved, and was again evolved by those whom it con- 
cerned. The usages of merchants gradually hardened into 
principles of conduct having the force of law» Though 
frequently at variance with the principles of local laws, the 



CH. Ill ORIGIN AND GROWTH OF LAW 201 

merchant-law was neverthdess universally acquiesced in 
and administered by courts of the highest eminence, such 
as those of the Hanseatic League and the Parloir aux 
Bourgeois at Paris. This, then, is another body of laws, 
having cosmopolitan validity like the canon law, which 
arises independent of the State, and receives obedience 
without any special sanction from the State. 

The separate development of law in the three kingdoms 
of England, France, and Germany, which have become 
definitely established by the end of the tenth century, must 
now be followed. 

England under Saxon rule had remained largely un- 
influenced by the events which moulded the fortunes of 
the Continent. Such rudiments of the feudal system as 
had established themselves had given rise to a similarly 
rudimental state of feudal law. On the whole, however, 
the old folk-laws held sway within their several areas. 
This arrested development greatly facilitated the work of 
legal unification to which the Norman kings devoted 
themselves. In this endeavour they were largely aided 
by the fact that England, as a conquered land, was a single 
fief in the hands of the king. They succeeded in little 
more than a century in creating a " common law " of the 
realm, the law of the royal court. 

This law, however, is by no means a collection of State 
enactments ; it is the law of a court. At first the kings 
send their ministers round the country to administer local 
law in local courts, and to look after the financial and 
administrative interests of the king. Gradually differen- 
tiation takes place and is accompanied by greater coherence. 
Before the end of the twelfth century there has evolved a 
royal court with purely judicial attributes, making regular 
visitations through the counties, but having its head- 

Siuarters at the residence of the king. It devises regular 
orms of procedure and keeps strict record of all the cases 
which come before it. In their decisions the judges unify 
and modify old folk-laws ; precedent is followed by pre- 
cedent ; and by the end of Henry III.'s reign, the law 
declared in the king's court has superseded local law and 
has become the Conunon Law of England. No one gave 



202 DEMOCRACY VERSUS SOCIAUSM part hi 

the judges power to declare law, or enacted that their 
decisions should become the law of the realm. Neverthe- 
less, it is the law of the realm, and all bend before its 
authority. 

Accompanying this spontaneous growth there is, how- 
ever, another development which bears some likeness to 
the conscious law-making of our time. England, owing 
to the conquest, is the domain of the king ; all that he 
has not expressly given away belongs to him. Hence he 
gives charters in great numbers, which become part of the 
general law. Further, as the lord of a domain, he may, 
within certain customary limits, make rules for its manage- 
ment, and as all England is a royal domain, the king 
assumes this power over all England. Hence arise royal 
assizes and ordinances, which come very near to modern 
ideas of law. 

There thus existed in Norman England various bodies 
of law, severally declared by kings, judges, landowners, 
custom, merchants, and ecclesiastics. Their unification 
through the establishment of one law -declaring agency 
would be a manifest advantage. This result flowed from 
the Great Parliament, where, for the first time, the repre- 
sentatives of the several sections of the people came 
together in one body. It gave to England a far more 
efficient law-declaring agency than any other which then 
existed or for centuries arose in other Teutonic countries, 
in spite of the fact that the canon law continued to be a 
rival of the national law. But even Parliament was not 
a law-making body at first. For two centuries it confined 
•itself to the enforcement of old customs, or of such new 
customs as had met with general observance without its 
sanction. Not till the time of the Reformation is the 
modern idea of law, made by the State and imposed upon 
its members, realised. 

The development of English law in one other direc- 
tion, that of equity, has yet to be mentioned. When, in 
the thirteenth century, as already stated, Parliament had 
become the sole law -declaring agency, it still refrained 
from enacting new laws. Yet the rapid development of 
industry urgently required new laws. Suitors, therefore, 



CH. Ill ORIGIN AND GROWTH OF LAW 203 

petitioned the Crown whenever the common law failed to 
provide a remedy. When the matter was one for legis- 
lative declaration, the king, acting through his council, 
brought it before Parliament. When the matter was one 
for the king's grace, he referred it to his chancellor, who, 
as ecclesiastic and president of the king's chancery, could 
pronounce on the remedy which conscience would dictate 
in the absence of positive law. Gradually this practice 
assumed regular shape. Records being kept, successive 
chancellors follow the rules laid down by their predecessors, 
and failing such, declare rules of their own, which guide 
their successors. Thus the Court of Chancery also becomes 
a law-declaring court, adding its own laws, based purely 
on the perception of natural rights, to those declared by 
Parliament. 

The peculiar feature in the development of English 
law, here briefly sketched, is, that in several directions it 
anticipates analogous developments in continental countries 
by many centuries. Earlier than elsewhere there arises a 
true law of the realm, though other laws also have local or 
sectional currency ; earlier also there arises a central law- 
declaring agency, though other law-declaring bodies con- 
tinue to exist. But — and this is the fact which shatters 
the contention that rights are created by the State — the 
law throughout grows and develops independent of the 
State. It is the creation mostly of the men who must 
obey it, and is mostly formulated by persons having no 
authority from the State to do so. Even when at last a 
parliament arises, possessing powers of legislation, it, for 
a long time, abstains from making laws, confining itself 
mainly to declarations of what the actual law is. Even 
this power it shares with an unauthorised body. The laws 
have been made, if they can be said to have been made, by 
the common people, merchants, ecclesiastics, and lawyers, 
and only to some slight extent by the king. Not a 
majority but a consensus of public opinion has evolved 
them, and it is this general consensus which has given 
recognition to individual rights, and not the State. 

The absence of State-law and the recognition of in- 
dividual rights through laws arising from other sources is 



204 DEMOCRACY VERSUS SOCIAUSM part hi 

a feature which stands out still more boldly in the legal 
development of Germany and France. Down to the 
sixteenth century there is in neither country any national 
law, but a medley of feudal, local, municipal, and royal 
law, besides the canon law and the law of merchants. 

The feudal and local laws of Germany were compiled 
for the first time in the thirteenth century by private 
compilers. The German Mirror^ the Saxon Mirrory the 
Swabian Mirror^ and the LMe Kaiser s Law^ are such 
compilations, and were accepted as actual law in spite of 
their private origin. Even when, a century later, official 
compilations were made {Landrechte)^ they were little more 
than new editions of the Mirrors. 

In the fifteenth century, however, a new development 
takes place. Germany is invaded by the Roman law, and 
German law ceases to develop on its own lines. The 
Corpus Juris Civilis of Justinian, as expanded by Italian 
commentators and glossarists, becomes the common law 
of Germany. This usurpation, however, is in nowise the 
work of the State. Once more it is the work of private 
persons : teachers and writers at the universities, as well as 
learned doctors practising at the various courts, declare 
the law, and the people accept it. 

The Roman law, however, did not displace local laws. 
On the contrary, the latter remain supreme. It is only 
when other sources fail that the Roman law is appealed to. 
The German maxim is : " Town's law breaks land's law ; 
land's law breaks common law." ^ 

These town laws, again, though based on charter pri- 
vileges and local customs, are the creation of local courts 
{Schoeffen-Gerichte) and not of any legislative authority. 

After the Reformation, however, royal legislation also 
begins to play a part. The great feudatories of the 
empire, having become independent potentates, aspire to 
being law-givers as well. New spheres of legislation, such 
as aliens, marine, literature, and others, fall exclusively 
into their hands, and in many directions they modify local 
laws. But their influence is far smaller than that of the 
Parliament of England, for the issue of their laws did not 

^ Jenlu, Lam and Politics^ P* 53* 



CH. Ill ORIGIN AND GROWTH OF LAW 205 

interfere with the fullest obedience being paid to older 
laws. 

Legal development has been closely analogous in 
France. Here also the first compilations of existing law 
are made in the thirteenth century, such as the Tres ancien 
Coutumier of Normandy, the Conseil for the Vermandois, 
the Livre de Jostice et Plet for the Orleanais and others. 
But, differing from the German practice, these text-books 
are not regarded as actual law. This, in disputed cases, 
is still ascertained by searches in the register of the court 
of the district, or by an enquete par tourbe. 

The first official attempt to ascertain what the laws are, 
was made by the French kings in the fifteenth century. 
Continued through four reigns (from Charles VII. to 
Louis XII.) these researches resulted in the compilation 
of the official Coutumiers. These show that each district 
had its own laws, administered by its feudal seigneur, who 
had right of pit and gallows, of^ toll and forfeiture. Of 
national law not a trace can be found ; complete anarchy 
prevails. 

These Coutumiers^ though they henceforth are 
authoritative declarations of what the law is, are mere 
compilations. No new laws enter into them. The sole 
intention is to do away with the necessity for enquites par 
tourbe. Therefore, a final enquete par tourbe is held. 
Representatives of every order and rank in the district are 
called together ; these discuss and alter the compilation, 
and finally declare it to be a true exposition of the ancient 
customs of their district. 

Other laws, however, co- exist with the Coutumiers. 
In Southern France, the pays de droit ecrity a modification 
of the Roman law, continues to prevail ; cities and towns 
have each developed their own law through their local 
courts, cours d'echevins; there is the law of merchants 
and the canon law, and, finally, royal law also appears as 
an important factor somewhat earlier than in Germany. As, 
by conquest, province after province is added to the domain 
of the Crown, royal ordinances are extended to them. 
The new spheres of legislation also fall into the hands of the 
king, who, from time to time, also succeeds in encroaching 



2o6 DEMOCRACY VERSUS SOCIALISM part in 

on the domain of older laws. But, in the main, the condition 
is the same as in Germany. Older laws remain intact, and 
the royal laws mostly cover but a comparatively small area, 
and cover that incompletely. The revolution at last makes 
tabula rasa of this anarchic condition, imposes a national 
law, and, for the first time in France, realises the modern 
idea of uniform law made by the State. 

This necessarily much abridged and hasty survey of 
the evolution of modern law reveals the following facts : — 

Law, till comparatively recent times, is not made by 
any legislative authority. Originating in customs, the 
result of experience confirmed by the actual or supposed 
commands of ancestors, its sole authority, for a long time, 
is its antiquity or supposed antiquity. Even when, at last, 
law is recorded and loses its previous flexibility, alterations 
of previous law as well as new laws, required by social 
necessities, are not imposed by the State. They develop 
and grow, and when general approbation has been given to 
them, they are finally declared by various authorities, the 
last comer among which is the State. Finally, there arises 
the questionable notion that the State can make laws 
instead of merely declaring what the law is. It is clear, 
therefore, that, during by far the greater part of our era, 
the State made no laws, and that the human rights recog- 
nised during this period and transmitted to the present 
time were not and are not granted by the State or any other 
governing authority, and that, therefore, they are natural 
rights. Whatever test is applied to the socialistic view of 
human rights, shows it to be erroneous, and, therefore, the 
system which is based upon that view must be a false 
system. 



CHAPTER IV 



NATURAL RIGHTS 



The purpose for which organised society exists being the 
furtherance of the happiness of all the members of society — 
the only manner in which this purpose can be fulfilled 
being the maintenance of the equal natural rights of all 
the members of society, — it follows that it is the duty of 
organised society, the State, to secure to all the full 
possession of their natural rights, i.e. to secure to each of 
them the fullest opportunity for the exercise of all his 
faculties, consistent with the equal opportunity of all others 
for the exercise of their respective faculties. Not only 
must there be no invasion of the sphere of any individual 
by other individuals, but the State also must abstain from 
any further limitation of the sphere within which each is 
free to act than suffices to maintain the equal freedom 
of all. 

Which are the natural rights, which, placed beyond the 
reach of any majority, cannot be limited or denied without 
injustice and consequent loss of happiness ? To deal at 
length with all of them would transcend the scope of 
this inquiry. Neither Socialism nor any instructed In- 
dividualism denies the right to free speech and publication, 
free thought and worship ; the right of marriage or the 
equal political rights of all adults of both sexes. Other 
natural rights are either denied or at any rate not so fully 
understood either in their extension or limitation, and 
must here be dealt with. This will be done in the 
following chapters. 



CHAPTER V 



THE ETHICS OF DISTRIBUTION 



Th e only means by which the State can assure the greatest 
aggregate sum of happiness to its members we found to be 
the observance of justice, i.e. securing to all equal oppor- 
tunities for the exercise of their faculties. In ordbir. that 
any one of them may exercise his faculties, he must satisfy 
the primary necessity of life, nutrition. In order that all 
may obtain food, some or all must exercise faculldes in the 
•production of food. The question arises, to ^hom right- 
fully belongs the food and other desirable thing^ which 
any member of a society has produced by the ex6-cise of 
his faculties ? r "■ , , 

Socialism, as already shown, replies, that the wealth 
produced by any and all the members of the State belongs 
to the State. The reasons by which this view is supported 
have been quoted verbatim.^ Before dealing ^th theni^ our 
independent inquiry into the ethics of the relations between 
State and citizens must be carried a step further than has 
so far been done. 

From the sociological standpoint, ethics are a definite 
account of the forms of conduct which are fitted to the 
social state, i.e. which will enable each miSQiber to live the 
fullest and longest life, while rearing a due number of off- 
spring. Differing from mere aggregations of animals, and 
even from those earliest human groups in which the purpose 
of contiguity is mainly mutual defence against external 
aggression, the social state implies efFectu^ co-operation 
in defence against external and internal aggression, as well 

^ Part I. chap. v. p. 41. 



CH. V THE ETHICS OF DISTRIBUTION 209 

as in industrial activities. In the more highly developed 
social .state, this latter object, industrial co-operation, is 
both more important and more continuous than defensive 
co-operation. The prosperity of any society, therefore, 
mainly depends on the extent to which the conditions for 
effectual co-operation, and especially industrial co-opera- 
tion, are fulfiUed. If these conditions are observed to a 
due extent, those individuals whose nature is most disposed 
to effectual co-operation will, on an average, live longer 
and leave greater progeny having similar tendencies. 
The whole society, thus brought into an ever better 
adaptation to the conditions of social life, will not only 
experience the greatest sum of aggregate happiness, but 
will also supplant other societies in which the conditions 
for^ effectual co-operation are less favourable. 

In'' order that the sentiments which make for social 
conduct may develop, each member of the State must reap 
more good than evil from social union. The loss from 
internal aggression, individual and social, must be less than 
the gain from industrial co-operation and from reduction 
of external aggression. The increase of egotistic satis- 
factions yielded by the social state is, therefore, obtainable 
only by an altruism which, to some extent, recognises the 
claims of others. Where this altruism is developed so 
little that f(?ar of retaliation is the only restraint, the gain 
from social union is comparatively small. Not only are 
aggressions frequent and extensive, causing great loss, but 
the gains from co-operation are small, because co-operation 
is limited in intensity and extensity by such aggressions. 
The gain increases in both directions as this pro-altruistic 
sentiment develops in the direction of the altruistic con- 
ception of equal rights, i.e. as the recognition of the equal 
rights of others becomes voluntary and geiieral. It is 
greatest where the conditions are such that each can satisfy 
all his needs and rear a due number of oflfepring, not only 
without hindering others, but while aiding them in doing 
the like. What then is the conduct from which evolve 
the sentiments producing this highest development of 
social life ? The following exposition will furnish the 
answer to this question. 



2IO DEMOCRACY VERSUS SOCIAUSM PART III 

The evolution of every species of higher animals is 
dominated by two laws, one egotistic, the other altniistic. 
The latter is, that during immaturity of the individual the 
benefits which it receives must be inversely proportioned 
to its capacity ; for the continuance of the species 
depends upon a due number of offspring being reared. 
During infancy the life of all young animals is dependent 
not on their own efForts, but upon parental care. During 
gestation the embryo derives its nutrition gratuitously 
from the system of the mother. After birth, the greater 
or less helplessness of the young animal requires the 
gratuitous supply of food and defence against enemies by 
either or both parents ; the rendering of these services 
becoming less and less necessary as, with the approach of 
maturity, the animal becomes better able to help itself. 
Other things being equal, therefore, that species will 
become most numerous and will supplant allied species 
in which the parental sentiment, compelling services being 
rendered inversely to the capacity of the offspring, is most 
highly developed, and similarly, within the species, the 
offspring of those possessing this sentiment to a higher 
degree will supplant the offspring of others. 

The human offspring is helpless and dependent for a 
longer period than that of any other species, and the 
parental sentiment and emotions are proportionately more 
highly developed. In the higher races of men, the love 
and protecting guardianship of the parents follow their 
children even beyond the parental home, fostering the 
growth of the allied emotions which cause children to 
return the parental love and its gifts when in their turn 
parents grow into advancing helplessness. The law, there- 
fore, applies in every respect to the human species as well. 
In early infancy the care bestowed must be incessant on 
account of the absolute incapacity of the human baby. As 
the child grows older, services previously rendered by 
mother or nurse may now be assumed by the child itself ; 
as the young men or women approach maturity and become 
able, through the performance of services, to obtain their 
own sustenance, the gratuitous provision of sustenance by 
parents is curtailed and ultimately withdrawn. Here also. 



cH.v THE ETHICS OF DISTRIBUTION 211 

benefits conferred are inversely proportioned to capacity, 
and those parents on an average will rear the greatest 
number of similarly disposed children, in whom the senti- 
ments which prompt to this parental sacrifice are strongest ; 
and those societies will outnumber and displace others in 
which these sentiments are most generally and strongly 
developed. Those parents in whom the sentiments 
prompting to sacrifices for the benefit of children are 
weakest, will, other things being equal, rear the fewest 
children ; their progeny, possessing similar natures, being 
ultimately displaced by that of parents in whom the 
parental emotions are more highly developed. 

Self-sacrificing parental love is the first of the emotions 
which prompt to altruistic acts. The sympathy which 
it engenders, extending to wife, brothers, sisters, and 
parents, widens into sympathy with the clan, the tribe, 
and the nation, and blossoming at last into that general 
feeling of beneficence which, counting all mankind 
as kin, prompts generally to beneficent acts. This 
social altruism, however, lacking certain elements of 
parental altruism, never can attain the same intensity. 
Yet that it may generally attain a high level ; that minister- 
ing to others' happiness may become an indispensable con- 
dition of self- happiness ; and that the happiness thus 
derived may be more intense and may be preferred to 
happiness derived from egotistic acts, may be seen in ever- 
multiplying instances of men and women who thus secure 
their happiness. Such voluntary beneficence, however, 
cannot be carried permanently to an undue extent. For 
the more generally sympathetic being, on an average, 
those in whom the parental emotions are also most highly 
developed, will not tax their resources for the benefit of 
others beyond the limit which allows a better bringing-up 
being given to their own children than to those of others. 

The other law is, that after maturity has been attained, 
benefit must be proportioned to capacity ; capacity being 
measured by fitness for the conditions of life. On no 
other plan could the evolution of higher types of life from 
lower types have taken place, than that among adults the 
well-fitted shall profit by their fitness, and that the ill- 



212 DEMOCRACY VERSUS SOCIAUSM partiii 

fitted shall sufFer through their unfitness. To see the 
absolute truth of this proposition, it needs but to imagine 
a species in which benefits were proportioned to ineffici- 
ency. In such case inferior would habitually survive 
superior and leave a greater number of progeny of like 
unfitness. A gradual retrogression woiid result, until 
the species, becoming less and less adjusted to the con- 
ditions under which the lives of its members must be 
carried on, would be exposed to universal suflfering, end- 
ing in extinction. 

When, on the other hand, the more eflicient experience 
the benefit of their efliciency, and the less eflicient sufl^er 
the penalty of their inefliciency, the progeny of the more 
eflicient, inheriting more or less of this better adaptation, 
will gradually displace that of the less efficient. The 
species as a whole will gradually become better adjusted 
to the conditions under which the lives of its members 
must be carried on, and an increase in the aggregate sum 
of happiness must result, as well as the tendency to still 
further change with changing conditions, on which depends 
the evolution of higher types. 

The survival of the fittest thus ensures that the 
faculties of every species tend to adjust themselves to the 
conditions under which the lives of its members must 
be carried on. It must be the same with men ; with 
faculties which are termed moral as well as with those 
which are termed physical. From the earliest times, 
societies composed of men whose feelings and conceptions 
were congruous with the conditions to which they were 
exposed, must, other things being equal, have multiplied 
faster, and must have displaced those whose feelings and 
conceptions were incongruous with their conditions. Con- 
gruity, more or less, of individual nature to the conditions 
of social life, therefore, is the essential condition of human 
existence in the social state, and that society will experi- 
ence the greatest aggregate sum of happiness and will 
survive all others, the average nature of the members of 
which is most congruous with the conditions of social life. 
In order that this highest average congruity may result, 
those whose nature is more congruous must, on an aver- 



cH.v THE ETHICS OF DISTRIBUTION 213 

age, survive those whose nature is less congruous, and the 
former must rear a greater number of similarly adapted 
children than the latter. In no other way can this gradual 
adjustment and ultimate complete adaptation be achieved. 
Not only the present, but still more the future happiness 
of mankind, therefore, depends upon compliance with the 
law, that every adult shall experience the consequences of 
his own conduct ; that the more efficient shall reap the 
advantage of their efficiency, and that the less efficient 
shall suffer the disadvantages of their inefficiency. 

The laws governing the distribution of wealth in the 
social state, therefore, are, first, that all individuals shall 
enjoy full and equal opportunities for the exercise of their 
faculties in the production of wealth ; second, that each 
of them shall possess all the wealth which the exercise of 
his faculties may produce from such equal opportunity. 
Not equality of wealth, as Socialism posits, but equality of 
opportunity and inequality of resulting wealth is thus the 
social condition which justice imposes. 

The law here set forth may seem repulsive to persons 
who, much affected by suffering which they actually 
witness, are indifferent to all other suffering. Neverthe- 
less does the highest altruism demand conformity of 
general conduct with its dictates. Private beneficence 
may advantageously smooth its hard edges ; may in many 
ways soften the inevitable suffering of the inefficient, the 
less efficient, as well as of the more efficient when 
occasionally overtaken by misfortune. But a general 
departure from the law would be unethical in the highest 
sense. For a people which in its corporate capacity 
abolishes the natural relation between efficiency and re- 
ward could not possibly survive. Either it mil expose 
itself to the miseries and unhappiness of slow decay, or it 
will be conquered and absorbed by a people which has not 
undermined its efficiency by the policy of fostering the 
survival of its inferior at the expense of that of its superior 
members. 

Suflfering is the inevitable concomitant of man's as yet 
imperfect adjustment to the social state, and the only 
means by which a more perfect adjustment and consequent 



214 DEMOCRACY VERSUS SOCIALISM PART III 

increase of happiness can be achieved. If mal-adjustment 
were not productive of unhappiness, or if it produced 
happiness, man's nature could not evolve into greater 
congruity with the requirements of social life. 

Moreover, incapacity causes unhappiness to the incap- 
able, directly through overtaxing deficient faculties, and 
indirectly through non-fulfilment of certain conditions of 
welfare. Conversely, capacity brings corresponding happi- 
ness to the capable, directly through easy and complete 
performance of tasks, and indirectly through the fulfilment 
of conditions necessary to welfare. Not only self-happi- 
ness, but other-happiness as well, is furthered by capacity 
and hindered by incapacity. The healthy, capable man, 
overflowing with joyfiil energy, spreads happiness around 
him through sympathy with his mental state. Finding 
self-maintenance easy, he can still further add to others' 
happiness by altruistic acts. The incapable man, on the 
other hand, whose faculties are overtaxed and whose spirits 
are depressed by non-success, becomes a source of depres- 
sion to all around him, and is less capable of furthering 
others' happiness by altruistic acts. 

In the social state all members suflFer from the in- 
capacity and profit through the capacity of any of them. 
Deficiency of labouring power, physical and mental, 
results in a smaller aggregate of produce and in a conse- 
quent reduction of the share available for each. Excep- 
tional labouring power, especially mental power, on the 
other hand, increases the aggregate produce, not only by 
the additional production of the more capable, but by 
increasing the productive power of less capable members 
as well. Organisation, inventions, discoveries, are all the 
work of the more capable, but add to the productive power 
of many. 

Other defects of some individuals similarly reduce the 
productiveness of the labour of many. Selfishness pro- 
duces friction ; dishonesty entails the waste of labour in 
supervision and other precautionary employments ; both 
defects thus reducing the aggregate produce of the general 
labour. 

In addition to the negative evils caused by incapacity, 



cH.v THE ETHICS OF DISTRIBUTION 215 

there arise positive evils as well. Paupers, hospital 
patients, and lunatics must be maintained, who consume 
without producing, as also the widows and orphans of 
those who, through weakness of constitution or intemper- 
ate habits, die early. Without further prosecution of this 
argument, it will be apparent, that the happiness of every 
member of the social body is raised by increase in average 
capacity, intelligence, and conscientiousness, and that every 
reduction in the average of these qualities lowers the happi- 
ness of all. 

One further result of selfishness, however, may yet be 
alluded to. The selfish person, missing the pleasures 
derived from altruistic emotions and actions, fails to ex- 
perience the greatest and most enduring happiness, while 
suffering positive unhappiness when, during his more 
advanced years, selfish pleasures pall. On the other hand, 
those whom altruistic sentiments prompt to corresponding 
acts, thence derive positive happiness, while escaping much 
unhappiness. That others' happiness is likewise furthered 
by those possessing altruistic natures and hindered by 
those possessing selfish natures, needs no proof. 

It follows Qiat the aggregate sum of happiness in the 
social state is dependent upon the aggregate adjustment 
of the society to the condition imposed by that state. 
These causes, however, extend beyond any one generation. 
Parents having vivacious minds and vigorous bodies are 
likely to transmit like sources of happiness to their oflP- 
spring, while unhappiness is entailed upon the progeny of 
parents having feeble minds and impaired physical con- 
stitutions. The emotional organisation which prompts to 
altruistic acts is similarly transmitted from parents to oflf- 
spring, and with it the happiness to which it gives rise. 
Likewise selfish, licentious, and dishonest parents are 
likely to transmit similar natures to their progeny. 
Future generations, therefore, are largely dependent for 
their happiness upon conditions transmitted from the 
present generation. Hence, social acts which further the 
multiplication of those less adapted to the social state 
lessen the aggregate of present and future happiness ; 
social acts which, in due degree, further the multiplication 



2i6 DEMOCRACY VERSUS SOCIALISM partiii 

of the better adapted increase the aggregate of present 
and future happiness. The former, therefore, are un- 
ethical, the latter ethical ; and the law that adults take the 
consequences of their own nature and that their progeny, 
inheriting, on an average, like natures, also take such con- 
sequences, tends to raise the aggregate sum of happiness 
by furthering the multiplication of those capable of ex- 
periencing and conferring most happiness, and hindering 
the multiplication of those less capable of experiencing and 
conferring happiness. 

One more consideration must be alluded to. If it is 
admitted that men's nature is changeable imder changing 
conditions, every proposal affecting social conditions must 
be examined with regard to its tendency to further or 
hinder progress towards the highest social conditions, and 
the correlative development of the highest human nature. 
Social conditions which, exempting men from the conse- 
quences of their own acts, withdraw the stimulus which 
the knowledge of such consequences supplies, must hinder 
the evolution of men's nature in the direction of this final 
goal. Disassociating reward from service rendered, they 
hinder the growth of the sentiment of justice, which, con- 
trariwise, is furthered by the daily association of reward 
with service arising from free contract. Inflicting injustice 
upon some, in order that undeserved benefits may be given 
to others, it hinders the development of altruistic senti- 
ments in both directions. The development of mankind 
towards the highest physical, mental, and moral condition 
is, therefore, dependent in two ways upon the State ab- 
staining from any general interference with the law, that 
every adult shall reap the consequences of his own acts : 
first, because the action of this law furthers the modifica- 
tion of men's nature in this, the highest direction ; second, 
because it ensures the multiplication of those possessing 
such modifications, ultimately making the latter permanent 
and general acquisitions. 

The faculties and emotions which make for efficiency 
in the social state, while partly identical, are partly diflFer- 
ent from those which make for efficiency in the sub-human 
and savage states. Parental and marital aflFections and 



cH.v THE ETHICS OF DISTRIBUTION 217 

the sacrifices to which they prompt, alike in kind though 
difFering in degree, make for efficiency in both states. 
Such traces of the sentiments of justice and beneficence 
as may be observed among higher animals, add to their 
efficiency, while in the social state these same sentiments 
highly developed are an essential condition of efficiency. 
For co-operation is furthered not only by the disapproval 
of aggression which the sentiment of justice implies, but 
also by assistance being voluntarily rendered without the 
expectation of an equivalent. 

The greatest diflTerence, however, arises from the fact 
that while animals, and to some extent savage men as well, 
are restricted to such food as nature produces spontane- 
ously, man in the social state produces his own food and 
other means for the satisfaction of desires, and produces 
them co-operatively. This co-operation in satisfying 
desire, whether it consists of the division or combination 
of labour, co-ordinates efficiency with service. Whoever 
produces anything which enters the circle of exchanges 
renders a service to all other men, making it easier for all 
to satisfy their desires, not only the desires for this parti- 
cular thing, but for all things. The efficiency of any 
individual for <he social state, therefore, largely depends 
upon his possession of faculties enabling him to render 
services to others through the eflTort to sustain himself, and 
upon the emotions which prompt him to render such 
services adequately. Capacity, industry, honesty, enabling 
and prompting their possessors to direct their self-sustain- 
ing labours towards rendering greater services to others 
than are rendered by those who are less capable, less in- 
dustrious, and less honest, must be accompanied by greater 
rewards than those others receive, if the whole community 
is ultimately to become more honest, capable, and in- 
dustrious. The self-sustaining faculties and emotions 
purely egotistic in the sub-human and savage state, thus 
become partly altruistic in the social state. In the former 
they enable tl.eir possessor to survive and leave progeny 
at the expense of others ; in the latter they enable him to 
do so while aiding others. Nature is " red in tooth and 
claw " below the social state ; within that state she com- 



21 8 DEMOCRACY VERSUS SOCIAUSM part in 

pels men to achieve the advantage of self by conferring 
advantages upon all others. 

These considerations leave no doubt as to what is the 
clear and imperative duty of the State with regard to the 
distribution of wealth. For they show that any action of 
the State in the direction of equal distribution, demanded 
by Socialism, would be socially deleterious, because it 
deprives the more efficient members of the State of their 
due reward, in order to hand it over to- the less efficient. 
Constituting non-compliance with one of the natural laws 
in obedience to which all life has evolved, the law that 
adults take the consequences of their own natures and 
acts, it inflicts upon society the penalties which such dis- 
obedience inevitably entails. Gradual adjustment to the 
necessary conditions of social life being prevented by the 
survival of the less efficient and less congruous, progress 
towards a higher social state and towards a higher type 
of human nature ceases. The suflTering entailed by exist- 
ing mal-adjustment is perpetuated and the attainment of 
a greater sum of aggregate happiness is prevented, with 
the ultimate result, that a society thus made stationary, 
if not retrogressive, must be supplanted by societies 
in which conditions favourable to further evolution are 
maintained. 

The reluctance to accept these conclusions arises largely 
from existing interferences of the State with the law that 
every adult shall reap the consequences of his own acts, 
through the creation of legal privil^es, especially private 
ownership of land^ and the consequent absence of equal 
opportunities for all. The monopoly of opportunities by 
a few, rendering nugatory the eflTorts of many whose 
natures are better adapted to the conditions of social life, 
prevents them from leaving a due number of children ; 
while the owners of these opportunities, though they may 
be less adapted, are by their possession enabled to rear a 
larger number. Further, the acquisition of special privi- 
leges is furthered by unsocial qualities, such as cunning, 
dishonesty, and greed, while their possession and inherit- 
ance confer reward without service or adequate service 
rendered, and thus still further disturb the natural relation. 



CH. V THE ETHICS OF DISTRIBUTION 219 

Under existing conditions, therefore, reward being largely 
severed from service rendered, the survival of the socially 
fittest is disturbed, and many, socially less fit than others, 
nevertheless survive, and leave a greater number of de- 
scendants. These facts, however, so far from contradict- 
ing the general theory and the conclusions based thereon, 
tend to their confirmation. 

Moreover, the disappearance of the less fit from exist- 
ing societies is nevertheless proceeding at a comparatively 
rapid rate. Public opinion, tending ever to become more 
healthy and exacting of compliance with higher ethical 
standards, represses unsocial conduct. Discourtesy, dis- 
honesty, untruthfulness, laziness, cruelty, sexual mis- 
conduct, and drunkenness are visited with strong social 
disapproval ; while courtesy, truthfulness, honesty, mercy, 
beneficence, application, and self-restraint excite more and 
more approbation. As a consequence, unsocial conduct is 
discouraged and social conduct encouraged ; social senti- 
ments are strengthened, and unsocial sentiments weakened. 
Hence heredity is modified by practice ; the unsocial 
sentiments are weakened in their possessors, who transmit 
more adapted natures to their children than they them- 
selves inherited, causing the gradual disappearance of such 
unsocial natures in a few generations. 

On the other hand, those whose unsocial tendencies are 
too strong to be repressed by the general sentiment, tend 
to die out. The self-indulgent, the drunkard, and the 
profligate, as well as the criminal classes, leave few children. 
Though many children are born to many of them, they 
mostly die in infancy or adolescence, partly through want of 
due parental solicitude, partly through the inheritance of 
enfeebled constitutions. The surviving children, inheriting 
like tendencies, also leave few children, and in a few gene- 
rations the strain has ceased to exist. 

Under conditions of social justice, when no legal 
monopoly -rights exist, the disappearance of the un- 
adapted, however, would be far more rapid. Reward 
being apportioned to service rendered, the artificial dis- 
turbance of the survival of the fittest would terminate. 
Qualities which now, by the acquisition of legal mono- 



220 DEMOCRACY VERSUS SOCIALISM PART III 

polies, lead to the acquisition of fortunes and power, would 
not benefit their possessors, and would therefore tend to 
disappear. The comparative equality of possessions, and 
disappearance of involuntary poverty, creating a more 
homogeneous society, would add to the force of public 
opinion, and make that opinion still more exacting of ethical 
conduct. At the same time the temptation to unethical 
conduct, arising on the one hand from excessive riches, 
on the other from poverty, especially from poverty in 
city slums, would be materially lessened by the scarcity of 
either condition. All these forces would unite to the 
modification of inherited tendencies in the direction of 
gradual and better adaptation to the conditions of social 
life. The remainder — individuals endowed with such un- 
social natures that these influences would fail to modify 
them — ^would be comparatively few, and their disappearance 
would, therefore, be still more rapid. The more eflficient 
would still receive the reward of their greater eflficiency, 
and the less efficient would still suflTer for their inefficiency. 
But as the diflTerences in efficiency would be lessened by 
raising the social efficiency of the great majority, the suflTer- 
ing would be comparatively slight, and the time would be 
materially hastened when, all mankind being approximately 
adapted to the requirements of social life, unsocial con- 
duct and consequent suflTering would disappear. 

The foregoing examination shows that the distributive 
proposal of Socialism is in the highest degree unethical 
and disastrous to the present and future wellbeing of 
mankind. An examination, in the light of evolutionary 
experience, of the reasons by which the exponents of 
Socialism support this proposal, shows them to be as futile 
as they are crude. These reasons will now be dealt with 
in the sequence in which they have been enumerated in 
Part I. chap. iv. 

The first of these is the allegation, that under the far- 
reaching co-operative processes of to-day, it is impossible 
for competition to ensure to every co-operator a reward 
commensurate with the services rendered by him. 

It is true that, under existing conditions, competition 
fails to assure to each co-operator in the co-operative 



cH.v THE ETHICS OF DISTRIBUTION 221 

system of production a reward accurately proportioned to 
the services rendered by him. This failure, however, 
obviously does not justify a proposal which aims at the 
absolute severance of reward from service rendered. On 
the contrary, it imposes upon society the duty to remove 
those interferences with the action of competition which, 
causing it to be one-sided, prevent its tendency to pro- 
portion reward to service coming into full play. What 
these interferences are, has been pointed out in Part II. 

The second line of reasoning is based on the con- 
ception, that "the special ability or energy with which 
some persons are born " is the result of ancestral evolution, 
and, therefore, a social product which, as such, belongs to 
society as a whole. 

Not only the special energy and ability of some, but 
all the faculties and emotions of every individual, are the 
result of ancestral evolution. The claim, founded on this 
consideration, that the results of the exercise of special 
ability and energy, the so-called " rent of ability," belong 
to society, overlooks several important facts. The first of 
these, elaborated above, is, that by delaying, if not pre- 
venting, the rearing of a more numerous progeny by those 
possessing special ability and energy, it is detrimental to 
the further evolution of all members of society in this 
direction. The other is, that special ability and energy as 
such produce no results, not even any " rent of ability." 
In order that such results may be produced, these qualities 
must be used productively. When so used they not only 
benefit their possessors, but, under just conditions, all 
other individuals as weU. The aggregate sum of happi- 
ness, therefore, is increased in two ways by the exercise of 
special ability and energy : first, in the greater happiness 
which their exercise brings to their possessors ; second, in 
the greater means to happiness which it places within the 
reach of all others as well. The incentive to the exercise 
of these qualities is the special reward which it brings to 
their possessors. If that reward is withdrawn, as by equal 
distribution it would be withdrawn ; if it is made as well 
to be inferior as to be superior, the exercise of special 
ability and energy will be cUscouraged, and the happiness 



222 DEMOCRACY VERSUS SOCIALISM part in 

not only of their possessors, but of all other men as well^ 
will be diminished. 

Moreover, to compare the increased reward derived 
from the exercise of special ability with the so-called 
" unearned increment " of rent is merely another proof of 
the radically defective analysis of economic facts habitual 
to socialists. For while an increase of rent comes to the 
owners of land without any service rendered by them, and 
as a deduction from the total result of the social product ; 
any increase in reward derived through the exercise of 
special ability is dependent, under natural conditions, upon 
additional service rendered by the possessors of special 
ability, which service adds more to the social fund than 
the reward amounts to which those who render it can 
possibly receive. 

The third argument is, that the reward which any one 
receives " depends entirely upon the desires and needs of 
others for his services " ; the value of the services, being 
thus a social product, belongs not to him who renders the 
services, but the society. 

It is undoubtedly true that the power of every 
individual to supply his wants in the co-operative 
industrial society depends mainly on the desire of others 
for his services. But the conclusion to which this fact 
points is not that he must be deprived of the reward which 
these others are willing to give him for his services. On 
the contrary, as the satisfaction of their desires for his 
services enhances their happiness, he who renders these 
services is entitled to a reward commensurate with the 
happiness which he confers. It is the expectation of this 
reward which stimulates his efforts to render services, i.e. 
to confer happiness ; and it is this reward which, enabling 
him who renders greater services than others to rear a 
greater number of offspring, will ultimately increase the 
services rendered by all. To deny a greater reward than 
the average to him who confers more than the average 
amount of happiness by his services, in order to increase 
the reward of him who confers less than the average 
amount of happiness by his services, must, therefore, reduce 
the aggregate sum of present and fiiture happiness. 



CH. V THE ETHICS OF DISTRIBUTION 223 

The fourth and last line of argument is that adopted 
by Mr. Edward Bellamy, and consists of the foUowing 
reasoning : Society as such enormously increases the 
productive capacity of every man, and, therefore, all the 
produce of every man's labour, and not merely the 
addition due to his participation in social advantages, 
belongs to society and not to the producer. 

The way in which this apparently illogical contention 
is arrived at is shown in the following quotation : — 

" This analysis of the product or industry must needs 
stand to minimise the importance of the personal 
equation of performance as between individual workers. 
If the modern man, by aid of the social machinery, can 
produce fifty dollars* worth of product where he could 
produce not over a quarter of a dollar's worth without 
Society, then forty-nine dollars and three-quarters out of 
every fifty dollars must be credited to the social fund to be 
equally distributed. The industrial efficiency of two men 
working without Society might have differed as two to 
one — that is, while one man was able to produce a full 
quarter-dollar's worth of work a day, the other could 
produce only twelve and a half cents' worth. This was a 
great difference under those circumstances, but twelve and 
a half cents is so slight a proportion of fifty dollars as not 
to be worth mentioning. That is to say, the difference 
in individual endowments between the two men would 
remain the same, but that difference would be reduced to 
relative unimportance by the prodigious equal addition 
made to the product of both alike by the social organism." ^ 

The fallacy in this reasoning is so clear that he who 
runs can read it. The existence of the social organism 
increases, according to the hypothesis, the value of one 
man's work from twenty-five cents to fifty dollars. Does 
it necessarily increase to fifty dollars also the value of the 
work of him who only produces half as much ? If, for 
instance, one man makes one pair of boots a day, while 
another man produces two pair of boots in the same time, 
does the soci^ organism increase the value of the one pair 
of boots to exactly the level of that of the two p^ of 

^ Ef Malay ^ p. 8i. 



224 DEMOCRACY VERSUS SOCIALISM part hi 

boots ? If not — and it will be admitted it does not ; that, 
on the contrary, the two pair of boots are worth exactly 
twice as much as the one pair under any given social 
conditions — it follows that the social organism does not 
make an " equal addition to the product of both alike." 
In the given case, therefore, Society increases the value of 
the one man's work from twelve and one-half cents to 
twenty-five dollars, and the value of the other man's work 
from twenty-five cents to fifty doUars. By appropriating 
the product of the labour of both. Society, therefore, does 
not extend approximately the same treatment to both of 
them, but the inequality of treatment thus meted out is of 
immense importance. 

For it is clear that neither the one pair nor the two 
pair of boots would have had any existence but for the 
use which each of these men made of the social organism 
by the exercise of their labour. Not to the social organism, 
therefore, but to the exercise of their respective abilities, 
must the existence of the boots be attributed. The social 
organism is merely an opportunity which all must use for 
the fructification of their eflTorts. The extent to which 
each does use it depends upon his own capacity and 
sentiments. The greater use any one makes of this 
opportunity, the greater is the service which he renders to 
Society. For Society to appropriate the result of the use 
which any one makes of social opportunities is therefore 
unjust and unwise. All that Society may and must do is, 
to see that these social opportunities are equally open to 
all, leaving to each the full reward which his use of such 
opportunities may bring to him. 

Moreover, the statement that Society is the only heir 
to the inheritance of intellect and discovery, is only true 
with regard to one of its parts. Intellect is a personal 
attribute as much as speed, imagination, muscular strength, 
or a good digestion. Like inteUect, all these faculties are 
the result of the ancestral struggle for existence and con- 
sequent better adjustment to the conditions of life. If 
intellect is a social inheritance, all these other attributes, a 
good digestion included, are also social inheritances. Yet, 
like intellect, these faculties cannot be exercised by Society, 



CH. V THE ETHICS OF DISTRIBUTION 225 

but by their individual possessors alone. They, therefore, 
are not social inheritances, in the only sense which such a 
statement conveys, that they are common possessions to 
which all are equally entitled. They are, on the contrary, 
individual inheritances to which the individual alone can 
claim a right, and which no one but the individual who 
has inherited them can use. 

If, on the other hand, the idea intended to be conveyed 
is that the result of the exercise of intellect is a social 
inheritance, the idea is negatived by the same considerations 
which were found to invalidate the similar claim made with 
regard to the result of ability and energy. 

It is, however, different with discoveries. Discoveries, 
inventions, and additions to knowledge are only temporarily 
individual possessions, and ultimately become social posses- 
sions and a social inheritance. The individual making 
a discovery or invention, or acquiring a new know- 
ledge, does so by utilising antecedent discoveries and know- 
ledge, the accumulated product of all past generations. 
We all stand on the shoulders of our predecessors ; can 
reach higher than they could reach, because the knowledge 
transmitted to us by them places us on a higher level. 
This accumulated and transmitted knowledge, however, is 
an opportunity open to all. The individual who, using 
this common opportunity, makes a further discovery or 
invention, or acquires additional knowledge, assumes no 
greater freedom than any other possesses. The new 
discovery, arising from the exercise of his individual 
faculty upon an opportunity equally open to all, is the 
exclusive and individual possession of the discoverer by the 
law that every one shall experience the results of his own 
acts. If he chooses to communicate the discovery, inven- 
tion, or new knowledge to others, he is free to impose the 
terms on which he will do so, and any use of the discovery, 
invention, or knowledge by others, contrary to such terms, 
is a breach of contract, an undue interference with the law 
of equal freedom. 

But just as all material products of labour ultimately 
merge again in the general stock of matter, so all new 
discoveries, inventions, and knowledge ultimately merge 

Q 



226 DEMOCRACY VERSUS SOCIALISM partiii 

in the general fund of knowledge. The individual 
having made the discovery or invention, or acquired the 
new knowledge, must die, and with him would die the 
result of his exertion unless it were adopted and preserved 
by other men of the same generation and of succeeding 
generations. The accumulation of discoveries and inven- 
tions, the fund of knowledge which any society possesses, 
is transmitted not by particular individuals to their 
descendants, but by previous generations to the present 
one, which in its turn will transmit it, enriched and 
enlarged by the efforts of its members, to future genera- 
tions. This fund, therefore, is a true social or common 
inheritance. As such all are equally entitled to use it in 
the only way in which it can be used, viz. acquiring it or 
as much of it as they will or can by their own efforts as 
one of the common opportunities for the maintenance of 
life and the achievement of happiness. For this common 
opportunity cannot be monopolised as other common 
opportunities can, in the way that its acquisition by one 
\inll prevent others from acquiring an equal share. On 
the contrary, the more knowledge is acquired by any man, 
and the greater the number of men who acquire the 
fullest knowledge, the easier becomes the acquisition of 
like knowledge by others. In every case, however, the 
acquisition or knowledge can be achieved by individual 
effort alone. While, therefore, knowledge is a social in- 
heritance and possession, yet all men cannot be entitled 
to equal knowledge, nor can knowledge be distributed 
among them unequally. What all are entitled to, what it 
is the duty of the State to bring about, is that all have an 
equal opportunity for the acquisition of as much knowledge 
as any of them may desire or can absorb. 

Again it must be pointed out that the right of each to 
an equal opportunity with all others for acquiring know- 
ledge does not involve any common right in the products, 
not even the material ones, which the acquisition of 
superior knowledge enables its possessors to produce. 
For knowledge, like intellect, ability, and energy, produces 
nothing ; the application of knowledge alone leads to 
material results. The product resulting from the appli- 



cH.v THE ETHICS OF DISTRIBUTION 227 

cation of superior knowledge, therefore, is in all respects 
subject to the same considerations as the product resulting 
from the exercise of superior intellect, ability, and energy ; 
it is an individual possession to which Society can urge no 
claims. 

With the exception of the first, all the reasons adduced 
in favour of social possession and equal distribution of 
labour-products suffer from the same defect. They all 
confuse the right of equal possession of desired things 
with the right of equal opportunities to produce desired 
things. The former is a spurious right, disregarding the 
essential conditions of life ; the other is a true right, 
emanating from and congruous xwith the essential con- 
ditions of life. Ethics, therefore, utter the same condem- 
nation of the distributive proposals of Socialism as we 
found Economics to do, i.e. that they are opposed to and 
destructive of the highest interests of mankind. Ethics 
as well as Economics show that there is only one true and 
beneficial system of distribution : the one which, founded 
on justice, leaves in the possession of every individual all 
the produce which the exercise of his faculties brings forth, 
or which others freely surrender to him as a gift or in 
return for services rendered to them, always provided 
that no one is granted a greater share than others in the 
common opportunities to produce or render services with- 
out his making full compensation to these others for any 
loss of opportunity which they may suffer in consequence. 



CHAPTER VI 

THE RIGHT TO THE USE OF THE EARTH 

The dry superficial area of the earth being the only 
medium through which external nature becomes accessible 
to man ; being not merely his only foothold and resting- 
place, but also the means through which he obtains access 
to all the matter which he, through the exercise of his 
faculties, changes into objects fit to satisfy his desires and 
maintain his life, — it foUows that freedom to use the earth 
is the indispensable condition for the exercise of man's 
faculties and the maintenance of his life. Hence the 
right to the use of the earth is a natural right, the 
denial of which involves the denial of the right to the 
exercise of any faculty, that is, the denial of the right to 
live. 

The right of any one to the exercise of his faculties 
being limited only by the equal right of every one else, 
the exercise of any faculty being dependent upon the use 
of the earth, it follows that the right of any one to use 
the earth is limited only by the equal right of every 
one else. The natural right to the use of the earth, 
therefore, is an equal right, inherent in all. If there 
were only one man upon this earth he would obviously 
be free to use the whole earth ; the right of any second 
man to do the like must be equal to that of the 
former. Nor can further multiplication bring about any 
change in this relation. Of all the millions inhabiting the 
earth to-day, each is free to use the whole earth or any 
part of it, provided he infringes not the equal right of 
any other man. And conversely, it is equally true that 



cH.vi RIGHT TO USE OF THE EARTH 229 

no one of them may so use the earth as to prevent any 
other from similarly using it. For to do so implies a 
claim to greater opportunities for the exercise of his 
faculties than others can enjoy. 

The earth, therefore, is the common property of all 
men — the common property of all now living men, 
subject to the equal rights of all succeeding generations. 
For just as the human beings now living are dependent 
upon the use of the earth for the exercise of their faculties 
and the maintenance of their lives, so will succeeding 
generations of men be dependent upon the same condition 
for the maintenance of their lives. A baby which will be 
born to-morrow or next year or a century hence, there- 
fore, will have, in its turn, the same right to the use of 
the earth as any one now inhabiting the earth. No 
arrangements made, even with the consent of all living 
men, can deprive any member of any future generation of 
his or her equal rights to the use of the earth. Likewise 
no arrangements made by past generations, even if all their 
members had consented to them, can deprive any one now 
living of his equal right. For every such arrangement, if 
enforced, would offend against the law of equal freedom, 
would deprive some of their right to an equal opportunity 
for the exercise of their faculties and the maintenance of 
their lives ; would run counter to the law, that each adult 
shall experience the consequences of his own acts, and 
would do all this at the dictation of some past generation, 
making them the masters of all subsequent generations. 

Justice, therefore, condemns private ownership of land. 
For if one portion of the earth's surface, however small, 
may justly be made private property, then all portions 
may equally be made private property, and consequently 
the whole earth may be made the private property of 
some men. As private property of any portion of the 
earth involves the right of exclusive use of such portion, 
the private ownership of the whole earth likewise involves 
the right of exclusive use of the whole earth. All non- 
landowners, under this condition, would have no right to 
the use of any part of the earth, would have no right to 
live upon it. Being here on sufferance only, being 



230 DEMOCRACY VERSUS SOCIALISM part in 

dependent upon the permission of the landowners for an 
opportunity to maintain their lives, the landowners may 
deny them such permission without any infraction of 
justice. As mere trespassers on the earth, the owners of 
the earth may justly hunt them off the earth, i.e. condemn 
them to immediate death. If, then, the whole earth can 
justly be made private property — a proposition involved 
in the claim that a part of it may be made private property 
— the law of equal freedom is denied. For even iif the 
owners of the earth were habitually to permit of its use by 
all others, the latter would have no right to such use — 
would be dependent upon such permission for the exercise 
of their faculties and the maintenance of their lives. 
Obviously, those who are dependent upon the permission 
of others for the exercise of their faculties and the 
continuance of their lives, cannot have equal freedom 
with these others. On the contrary, the others are 
absolute masters, and they are slaves without any rights. 

Though the whole earth has not yet been made private 
property, the most valuable parts of the earth have been 
so appropriated. As a consequence vast numbers of 
hvunan beings in every civilised country are deprived of 
their equal right to the use of the earth, are dependent 
upon the permission of others for the use of any op- 
portunity to exercise their faculties and maintain their 
lives. The conditions which would arise if the whole 
earth were privately owned have actually arisen in civilised 
countries through the private ownership of all the land of 
such countries. For though elsewhere there is yet land 
not privately owned, it is too distant or too little 
productive to enable the majority of non-landowners to 
escape from the conditions prevailing in their country. 
In every civilised country the majority of the non-land- 
owners, therefore, are deprived of their right to use their 
faculties for the maintenance of their lives, while amongst 
the landowners themselves there prevails the greatest 
disparity of right. A few, owning more or less extensive 
areas of valuable land, enjoy opportunities far in excess of 
what equity could assign to them ; the majority, owning 
small areas of little value, enjoy opportunities of less 



cH.vi RIGHT TO USE OF THE EARTH 231 

extent than equity would assign to them. What justice 
requires, the recognition of the right of all to equal 
opportunities for the exercise of their respective faculties, is 
absolutely denied in all civilised countries. 

This denial of justice, this abrogation of fundamental 
rights, has arisen, exists, and continues to exist, not in 
spite of the State, but through the direct action of the 
State. As will be shown in the next chapter, the State, by 
a consistent course of force and fraud, has created private 
property in land, and now maintains it by force. Were it 
not that police and soldiers are ready to enforce the claims 
of private owners, the institution of private ownership 
could not maintain itself. Men cultivating or otherwise 
using the land would not for long continue to pay others 
for the privilege of doing so, if the State did not force 
them ; still less would men, seeking for an opportunity to 
maintain their lives, allow vast areas of valuable land to 
remain unused while they must starve. 

The State, therefore, is not merely guilty of neglecting 
one of its fundamental duties in allowing private property 
in land to continue ; it commits the positive wrong of 
maintaining this unjust condition. Yet, as it is the 
primary duty of the State to maintain justice, to prevent 
any infringement of the equal rights of all its members, 
the State is bound to frame and enforce regulations which 
will safeguard the equal right of every one of its members 
to the use of the national land. Nor would it be difficult 
so to do. The opportunity which any piece of land offers 
for the exercise of faculties is measured by its value ; the 
product of the exercise of faculties on any piece of land is 
measured by the value of such produce minus the rental 
value of such land. The land offering the least valuable 
opportunity which must be used, having no rental value 
under natural conditions, the rental value of all superior 
land is the measure of the superior opportunity inhering 
in it. The State, taking for common purposes the annual 
rental value of all land, would equalise all natural op- 
portunities and maintain the equal right of all to the use 
of the land. All would have an equal opportunity to use 
any part of the land, and those who obtained the privilege 



232 DEMOCRACY VERSUS SOCIALISM part in 

of using superior opportunities would pay full com- 
pensation to all others for the special privilege accorded 
to them. 

An illustration will make this clear. A father leaves 
to his three sons, in common, property consisting of three 
houses of unequal value. Each of the sons wants to 
inhabit one of the houses, and the question arises, how is 
the common right of all three to be maintained while ac- 
cording to each the use of a house. They decide the issue 
in this way. Each of them makes an offer of what rent 
he will pay for the use of one or more of the houses. 
When the offers are compared, it is found that the 
highest rent offered for the largest house is )^ 1 50, and is 
made by the eldest. He, therefore, is accorded the use of 
this house. The next eldest offers the higher rent for the 
second house, jCioOy while the youngest son has offered a 
rent of ^50 for the smallest house. They are, therefore, 
granted the use of these respective houses. The rent for 
the three houses, ^^300 in all, is placed in a common fund, 
and is equally divided between the three, each of them 
receiving jC^oo- Obviously this method safeguards the 
equal right of all of them, without any interference with 
the freedom of any. 

That the equal right of all the members of the State 
to the use of the land may be similarly safeguarded, that 
such a system may be carried out without any interference 
by the State with the individual use of land, and while 
fully maintaining the individual ownership of any im- 
provements placed on the land, will be fully shown in Part 
v., when dealing with what is known as the Single Tax 
proposal. For the present purpose it suffices to have 
shown that justice cannot recognise any private property 
in land, and imperatively demands that the State shall 
restore to every one of its members his natural inherent 
and equal right to the use of the earth. 



CHAPTER VII 



THE ETHICS OF PROPERTY 



Th e sense of proprietorship exists to some extent in the 
animal world. Squirrels and badgers have their hoards ; 
dogs defend articles left in their charge, and bury bones 
for future consumption ; and many animals, like the dogs 
of Constantinople, resent the intrusion of members of their 
own species into the quarters which they regard as their 
own, or belonging to their special troop or herd. It is, 
therefore, not surprising that a like sentiment exists even 
among the most primitive of men, though in a similarly 
rudimentary form. 

The conditions of savage life cause the proprietary 
sentiment to be indefinite and restricted. Deficient in 
imagination, savage man has no adequate consciousness of 
the future and its recurrent wants. The stimulus to in- 
dustry, therefore, being weak, there goes with it a similarly 
small development and consequent indefiniteness of the 
proprietary sentiment. The low industrial development 
causes this partially developed and indefinite sentiment to 
be confined in extent. Beyond his arms and a few rude 
appliances the savage has nothing that can be accumulated. 
Under these circumstances he cannot have a clear or 
extensive consciousness of individual possession. For, like 
other sentiments, that of proprietorship depends for its 
development upon the experience, continued through many 
generations, of the gratifications which possession brings. 
Where the conditions of life restrict these experiences the 
sentiment must remain correspondingly weak. 

Nevertheless, even amongst the lowest savages, indi- 



234 DEMOCRACY VERSUS SOCIAUSM part iir 

vidual property is claimed in arms, in personal decorations, 
frequently consisting of relics of conquered enemies, and 
in such appliances as minister to bodily wants and are 
capable of repeated use. As we ascend in the scale, other 
things, such as skins, huts, utensils, clothes, and others 
similarly adapted to recurrent use, are seen to be private 
property, while the hunting-ground, in which no individual 
claims can be marked off, is regarded as the common pro- 
perty of the horde or tribe. 

When animals become domesticated and give rise to 
pastoral life, and still more when agriculture is combined 
with it, the field over which private possession can extend 
is greatly enlarged. A further extension is made possible 
when exchanges arise, first in the form of barter, and 
subsequently in the more definite form of sale and 
purchase. 

This extension of the area of private proprietorship is 
accompanied by a greater definiteness in the correlative 
sentiment. During the hunting stage every member of 
the horde helps himself freely to any game killed by one 
or more individuals, though not infrequently the right of 
the successful hunter to choice parts, skin and horns, is 
recognised. No method of preserving meat being known, 
and game being frequently too large to be consumed by one 
family before it becomes unfit for use, this form of joint 
proprietorship is imposed by natural conditions. Similarly 
in the pastoral stage, the absence of money and market 
values makes it impossible to assign to every member of 
the patriarchal family and to its dependents such parts of 
the produce of the herd or of the herd itself as is propor- 
tionate to the labour expended by each. Hence all pro- 
perty is centred in the hands of the patriarchal housefather, 
who assigns to every member of the household as much of 
it as he, guided by ancient custom, deems fitting. 

When the patriarchal group settles down to agricultural 
pursuits, reverence for ancient customs, strengthened by the 
worship of ancestors whose commands are supposed to be 
embodied in these customs, as well as the necessities of 
mutual defence, combine to maintain the system of joint 
production and joint consumption. Exposed to constant 



CHAP. VII THE ETHICS OF PROPERTY 235 

aggression, no individual, separated from his kindred, 
would be able to maintain his life or keep any property. 
Nevertheless, differentiation soon begins within the com- 
munal group. Each person establishes individual owner- 
ship in things on which he has expended separate labour, 
in things which he has acquired in exchange for the pro- 
ducts of his separate labour, and in things which his indi- 
vidual prowess has won from an enemy. Nevertheless, the 
greater part of every individual's exertion being directed, 
in co-operation with those of others, towards common 
production, the principal product of each individual's 
labour is enjoyed in common with these others. Compen- 
sation for injury suffered by any member of the group is 
similarly a joint possession of all those who are under the 
obligation of the blood-feud, though there can be little 
doubt that, when the character of the things given in com- 
pensation allowed of it, they were generally divided among 
the members of the group. 

As soon, however, as greater external safety makes the 
shelter of the family group of less importance, while grow- 
ing commercial intercourse and increasing differentiation 
of pursuits multiply the opportunities for acquiring indi- 
vidual possessions, an external differentiation begins. For 
the communal system bore within it from the first a cause 
of dissolution ready to operate as soon as the conditions of 
life allowed of it. The more restless and independent of 
its members must always have chafed at the restrictions 
placed on their activities, while the more industrious and 
skilful must have felt the injustice of the idle and unskilful 
taking equal shares with themselves. These, therefore, 
avail themselves sooner or later of favourable conditions 
which enable them to leave the house or village community, 
which ultimately dissolves and divides its property amongst 
its members. Private ownership begins thus gradually to 
supplant joint ownership in all the products of labour as 
soon as the conditions which impose joint ownership are 
withdrawn. Each individual claims full and exclusive 
possession and property in the produce of his own exer- 
tions, in obedience to the law, that each adult shall experi- 
ence all the consequences of his own acts. 



236 DEMOCRACY VERSUS SOCIALISM part hi 

The origin of proprietary rights in things which are 
not the produce of labour must now be alluded to. The 
primitive savage, in whom the sentiment of justice is as 
yet but little developed, regards his wife and children as 
his absolute and exclusive property. He may kill them or 
sell them into slavery without fear of incurring the dis- 
approval of his fellows. Reverence for ancient customs, 
ancestor worship, and the acquisition of wives by purchase 
or capture tend to prolong this subjection, so that it is 
found even in comparatively civilised communities, such 
as China. 

As the greater physical strength of the male leads to 
the establishment of proprietary rights in women and 
children, so greater prowess in war establishes property 
rights over the persons and possessions of conquered 
enemies. Though there are some contributory causes of 
later origin, war is the primary as well as the more general 
cause of property in slaves and of private property in land. 

In the absence of any greater industrial development 
than is possible during the hunting stage slaves are almost 
useless, and, where game is scarce, a disadvantage. 
Savages, therefore, rarely make slaves of their captives ; 
they either kill and eat them, or, in rare cases, adopt them 
into the tribe. Slavery gradually supplants cannibalism as 
the pastoral and agricultural stages are reached, and, finally, 
becomes a settled institution. For tribes who use their 
captives as producers, while their men are all warriors, 
have a great advantage over tribes which, killing their 
captives, can only bring a part of their men into the field. 
The conquest and displacement of the more savage and 
ferocious by less savage and ferocious tribes has thus been 
furthered by slavery. 

As, however, decrease of military activity, lessening the 
number of deaths by violence, leads to an increase in the 
number of native men, while at the same time the slave- 
class is less frequently increased by fresh captives, some of 
the free population must take part in industrial activities. 
When, through private ownership of land, free labourers 
become disassociated from the soil and are forced to sell 
their labour to others for little more than sustenance. 



CHAP. VII THE ETHICS OF PROPERTY 237 

slavery tends to disappear. For in the competition between 
free labour and slave labour the latter is invariably found 
to be the weaker. In relative interest, intelligence, and 
energy the free labourer is far superior to the slave 
labourer, and, therefore, the more profitable productive 
agent. This economic cause, tending to produce the dis- 
appearance of slavery, is ultimately assisted by the 
developed sentiment of justice in causing the abolition of 
slavery, even where, as in domestic service, the economic 
cause, by itself, would not be active. 

In the hunting as well as in the pastoral stage the 
participation in the use of the land must be a joint partici- 
pation. The hunter must be free to follow his game, and 
herds must be driven from place to place as the seasons 
and the state of grass and water dictate. When, with the 
agricultural stage, the individual use of particular areas 
of land becomes possible, many circumstances delay its 
adoption. Traditional usage, sanctified by ancestor 
worship, has formed sentiments inimical to change. 
Impossibility to fence off large areas plays a restraining 
part, and the absence of any knowledge of manures com- 
pels the frequent shifting of cultivated areas through 
exhaustion of the soil. 

Hence, throughout long stages, land is not only owned 
jointly by the family, village, or tribe, but it is even used 
jointly. Even when joint use of agricultural land is 
abandoned, and when, through greater fixity of structure, 
a house lot is used for a long time by the same family, 
this individual use of land fails to establish individual 
ownership. As soon as the crop is taken oflF, or planted 
trees have died, or the house disappears, the land reverts 
to the community, and agricultural land is subject to re- 
allotment at more or less regular periods. As a typical 
example, the Teutonic mark may be alluded to. The 
territory was owned jointly by the whole clan, composed 
of kindred families, every freeman having the right of use 
to some arable land, as well as to meadows, pastures, and 
wood. All but the arable land was used in common, and 
the latter reverted to the same condition as soon as the 
crop was taken oflF, being then used as common grazing 



238 DEMOCRACY VERSUS SOCIALISM part in 

land. Thus the right of each adult male member of the 
clan or village, permanent only as regards the actual home- 
stead, was for the rest of the nature of a usufruct only, 
the ownership of all the land being vested in the collective 
body of free men. 

Wherever common ownership of the land has termi- 
nated, force, either internal or external, has been the cause. 
Invasion and conquest give unlimited possession of the 
person and property of the conquered. Along with other 
spoils of war the land becomes a spoil, being henceforth 
owned by the conquering leader, chief, or king, and 
partly allotted by him to his followers, on conditions 
which, more or less effectively, preserve his supremacy. 

Similarly, long-continued resistance to invasion, giving 
rise to those class distinctions which always accompany the 
militant state, enables the more powerful to appropriate 
part of the common property. The personal subordina- 
tion, necessary in war, becomes permanent where warfare 
is chronic, and produces sentiments which lead to acquies- 
cence in aggressions upon the common property. Such 
aggression, at first spasmodic, is converted into a State 
policy when the interests of the king induce him to 
endeavour to break up the village or dan organisation of 
society.* 

Conquest and internal aggression are thus, everywhere, 
the causes of slavery and or the individual ownership of 
land. The private ownership of land, established by 
militancy, is, however, incomplete. Qualified in one 
direction by the right of the suzerain to customary services 
by the landholders, it is qualified in the opposite direc- 
tion by the rights of sub-tenants and serfs to a share in 
the produce of the soil. In both directions a rent-charge 

^ *' The great landowner it the creature of the State ; the village group of &rmert is 
not. The individual proprietor of a vast domain cannot maintain his position unless he 
can obtain the power^l assistance of the State Courts and the strong support of the 
militarv power. His interests conflict too evidently with the interests of those who 
serve him, and without whose labour his domain would be worthless. He is the 
favourite of the State, and every step of State progress is marked by a corresponding in- 
crease in his ranks. When the State extends its conquests into hostile lands it plants 
its faithful soldiers as landowners on the conquered soil. When it annexes the domains 
of the Church it distributes them among a new territorial aristocracy. When it finally 
breaks the power of the clan it converts the clan chief into a landlord. On the other 
hand, the clan and the household are older than the State, and utterly opposed to it in 
principle.** — ^Jenks, Law and Politia during the Middle Aget, pp. 162, 163. 



CHAP. VII THE ETHICS OF PROPERTY 239 

limits the ownership of the tenant-in-chief ; that due to 
the suzerain being used, more or less faithfully, for 
common objects ; that due to the sub-tenants and serfs 
being used for their private objects. Growing industrial- 
ism and decline of militarism afford the opportunity to 
the landholders, who, as the ruling class, are also either 
actual legislators or possessed of the greatest influence 
over legislators, to get rid of both limitations. Military 
obligations are at first exchanged for a money rent, for 
which, subsequently, a tax on the whole people is substi- 
tuted. With the decline and ultimate disappearance of 
serfdom, and the substitution of money rent for obligations 
of service, the qualified rights of the sub-tenants and 
former serfs become obscured and ultimately terminate. 
The rent, at first fixed with due r^ard to their rights in 
the soil, is gradually increased as these rights fade from 
view, until at last, absorbing the value of such rights, it is 
equal, or even in excess, of the full value of the land. 
The absolute ownership of land by individuals, now 
existing, therefore, is a comparatively late development, 
having its root in conquest, force, or fraud. 

Both the ownership of slaves and the private ownership 
of land thus stand on a different basis, and derive their 
existence from a different cause than the ownership of the 
products of labour.^ 

^ ** In the first place property in land it, in our opinion, the only form which serves 
as an instrument of control. ' Property ' in movable goods should be distinguished from 
* property ' in immovable goods. What is there in common between the unlimited 
possession and free disposal of chattels and that juridical relation, in virtue of which a 
person may keep a piece of land exclusively for his own benefit ? Yet for these funda- 
mentally different conceptions the European languages uae but one term, with conse- 
quent indistinctness and confusion of ideas in science. 

" Common property {E^aitwH, frofrium) is a contradiction in terms ; yet even 
separate or private *■ property ' has been discussed as a simple concept, and what might 
be true of property in movable goods has been applied without distinction to property in 
land, a very different thing. This is certainly a great mistake. 

" To justify private property as the natural right of the individual to the fruit of his 
own exertions sufficiently explains property in movable goods, including the product of 
the land which a man's own labour has tilled, bat does not explain property in land or 
in the fruit of another's labour ; while to trace its origin to the actual possession of 
weapons, ornaments, etc., an attempt which Dargun has recently renewed, leaves a gap 
between movable goods and immovable which no analogy can bridge over, for they are 
totally different. No doubt individual property in movable goods has always existed, 
for the conditions of human life require it. But the conditions of property in land are 
quite different. Land is not the product of human labour, and its use is temporary ; it 
can be occupied, detained, or possessed only in a limited and figurative sense ; it might 
be possible to defend a small portion of land against trespassers ; but it wotdd be im- 



240 DEMOCRACY VERSUS SOCIALISM part hi 

It is the same with monopolies. Every monopoly 
created by the State, as has been shown, has for its basis a 
special privilege jgranted to some, which cannot be equally 
granted to all. The possession of such privileges gives 
to their possessors a twofold advantage over others. It 
gives to them a greater opportunity to exercise their 
faculties, greater freedom than others can enjoy ; and it 
enables them to appropriate wealth produced by others 
without rendering equivalent service in return. 

The distribution of wealth being an assignment of 
ownership, the principles which determine the distribution 
of wealth must also determine proprietary rights. These 
principles we found to be that aU the members of the 
State are entitled to full and equal opportunities for 
exercising their faculties in the production of wealth, and 
that each is entitled to full proprietary rights in all things 
that his exertions produce. All forms of wealth being 
the joint product of labour and of external matter, rights 
of property must be governed by a combination of the 
laws governing individual exertion and the use of the 
earth. Labour, therefore, can give no right to wealth 
which is derived from a better natural opportunity than 
others are permitted to use. No man having a better 
right than any others to the use of the earth, the rights of 
all to use the earth are equal. Whatever wealth any 
man's labour extracts from natural opportunities which no 
one else wants, belongs to him and to him alone. But if 
more than one desires to use any part of land — that is, if 
the land have any value — the one who receives the privilege 
of using it must compensate all others for the special 
privilege accorded to him. For that any part of land is 
desired by more than one man, that it has a value, proves 
that it affords a better opportunity for making wealth, or 
confers some other advantage greater than is open to all. 
Society as a whole, therefore, is entitled to that part of 

possible to defend the larger tracts, which alone are under consideration here. Property 
in land is not a physical fact, and cannot be explained by physical facts— occupation, 
labour, etc. To say that land is occupied or possessed, as is currently done, is to use a 
metaphor or a legal fiction. Land, by its nature, admits of only one relation to man, 
the enjoyment of its use, the common enjoyment of many." — ^Ludwig Gumplowicz, 
TAe Outlines of Sociology^ pp. 114, X15. 



CHAP. VII THE ETHICS OF PROPERTY 241 

individual labour-prcxiucts which is due to the better 
natural opportunities used by any of its members, while 
each member has full proprietary rights in all that part of 
the produce of his labour which the same exertion would 
have produced if applied to the least productive oppor- 
tunity which must be used by some men. The one is 
rent, a common property, to which all are entitled equally ; 
the other is the product of individual exertion, to which 
each is entitled individually. 

It foUows that property in slaves, in land, and in 
monopolies is in reality an infringement of the right of 
property. For just as slavery deprives the slave of his 
individual property, so does the private ownership of land, 
giving to a few the rent which equally belongs to all, 
deprive the majority of men of their common property, 
and so does the private ownership of monopolies deprive 
all other men either of a part of the one or of a part of 
the other. 

In addition to this direct infringement of " the sanctity 
of property," private ownership of land involves indirect 
infringements as well. These have been set forth in 
Part II. chapter viii., but the importance of one of 
them justifies its further exposition. The appropriation 
by the landlords of the common or social property com- 
pels the State to deprive its members of their individual 
property. In guarding the natural rights of its members, 
and performing the duties consequent thereon, the State 
incurs expenses. These expenses increase with every 
addition to the population, and with every increase in 
social integration and differentiation. This social growth, 
however, adds to the common fund, the rental value of 
land, out of which these common expenses can be met, by 
far more than it increases the necessary and legitimate 
expenditure. When, however, this common fund is ap- 
propriated by individuals, the expenses of the State must 
be met in other ways. That way is taxation, i.e. the 
State now deprives all its members of part of their indi- 
vidual property. The State having, by its own act, 
handed to individuals the common property of all, now 
infringes upon the individual property of each of its 

R 



242 DEMOCRACY VERSUS SOCIALISM partiii 

members. To the theft of the common property, the 
theft of individual property is added. 

The object of the State, the fuller ensurance of the 
equal rights of all its members, is defeated by the habitual 
curtailment of any of these rights. Nevertheless, occasions 
may arise when some or all rights must be temporarily 
curtailed, in order to ensure their permanent recognition. 
Such necessity may arise from external aggression. When 
the existence of the State itself is threatened, the State 
may, in so far as appears necessary, call upon all its 
members to risk their lives in defence of the common 
rights. Property being less important than life itself, the 
right to property is of inferior importance to the right 
to life — the State has still less cause to abstain from in- 
fringing the right to property. For purposes of defensive 
war, therefore, when the common property is insufficient 
to meet the necessary expenditure, individual property 
may be appropriated by the State, provided that the 
sacrifice of time, health, life, and property which the 
members of the State are called upon to make is in some 
manner equalised. Taxation of individual wealth, un- 
justifiable as an habitual measure in time of peace, may, 
therefore, become justifiable as a temporary measure for 
purposes of defensive war. 

The false notions of proprietary rights engendered by 
the existing systems of monopoly have obscured even this 
truth. While some States rely upon voluntary enlistment 
even in time of war, others habitually practise compulsion, 
and in none is the right of the State to compel its members 
to sacrifice their lives in the common defence questioned. 
While thus claiming the right to infringe, or actually 
infringing, the equal right to life of some of its members, 
the State does not generally expect, nor compel a similar 
sacrifice of property. Instead of calling upon the owners 
of accumulated property to furnish the funds necessary 
for defence, the State generally borrows such funds from 
them, repaying them with interest out of the proceeds of 
taxation, which mainly falls, not on accumulated prof)erty, 
but on the labour of those classes which have borne the 
major part of the sacrifice of time, health, and life. The 



CHAP. VII THE ETHICS OF PROPERTY 243 

masses of the people, from whom the bulk of the active 
defenders are drawn, are thus compelled to sacrifice the 
produce of their labour as well ; while the owners of 
accumulated property, who generally take no part in the 
actual defence, sacrifice little or no property, and fre- 
quently receive back, apart from interest, a greater amount 
of wealth than they have lent to the State. 

Property in things not produced by labour is a direct 
denial of the only true right of property, that in things 
produced by labour. All these forms of property — slavery, 
private ownership of land and of monopolies — are so many 
endeavours to enable some to live without labour, by the 
forcible appropriation of the produce of others' labour. 
Being, therefore, an infringement of the law of equal 
freedom, as also of the law that every adult shall experi- 
ence the consequences of his own acts, they have no 
ethical basis, and are contrary to justice. Not till all 
these forms of invasion of property rights are abolished 
does the true right of property prevail. Nor can it 
prevail under Socialism. For Socialism also invades the 
valid individual property rights of many of its members, 
of all those who are more able and industrious, by handing 
over to the less able and industrious a part of the property 
of the former. For the injustice now prevailing it pro- 
poses to substitute another mjustice, and must, tiierefore, 
perpetuate, though probably in slightly different forms, 
the evils now existing. 



CHAPTER VIII 

THE RIGHT OF FREE INDUSTRY 

The law of equal freedom has, as a necessary corollary, 
that every one shall be free to exercise such of his faculties 
as he pleases, and in such times, places, and manner as to 
him seems best, provided his resulting activities do not 
infringe the equal rights of others. Justice, therefore, 
cannot recognise any limitation upon or interference with 
the industrial and professional activities of men other than 
is necessary for the maintenance of equal freedom. Any 
action by the State or by individuals in this direction is an 
infringement of the right of equal freedom. " The right to 
labour," therefore, is a natural right, not in the sense in 
which Socialism uses the term, that the State shall provide 
work for all its members, but in the sense that it is the 
duty of the State to prevent an equal opportunity for 
work being denied to any one, and to abstain from inter- 
ference with the amount, kind, and manner of work which 
any one elects to do. 

Socialism, by entrusting the conduct of industries to 
the State, proposes to abolish this natural right, and 
thereby, depriving all or nearly all of freedom, would 
establish a virtual condition of slavery. 

Slavery has existed under many and widely varying 
forms. The difference is great between the mild and 
patriarchal system of slavery as it existed in many pastoral 
tribes and now exists in Turkey, and that which, arising 
when slaves are bought and sold, leads to their treatment 
as mere working animals without any rights, such as 
existed in Rome and in the southern states of America. 



CHAP. VIII RIGHT OF FREE INDUSTRY 245 

Serfdom, the form of slavery arising from conquest, like- 
wise exhibits widely different forms of severity, extending 
all the way from the mild form which it had assumed in 
Russia on the eve of its abolition to the extreme degrada- 
tion of the Peruvians after the Spanish conquest. 

What is it that, nevertheless, enables us to recognise all 
those widely varying conditions as states of slavery ? In 
other words, which are the essential features which dis- 
tinguish slavery from freedom ? There are two and only 
two. One is the right of the owner to determine the 
time, place, and direction in which the slave shall exercise 
his industrial faculties ; the other is the right of the owner 
to appropriate part or all of the product of the slave's 
labour. These two conditions, being the persistent con- 
comitants of slavery from its mildest to its most severe 
forms, are the essential conditions of slavery. Where they 
exist slavery exists, and the question who inflicts the 
slavery, who is the owner, does not aflFect the issue. 
Slavery, therefore, may arise from subjection to one in- 
dividual, or to an organised body of many individuals, the 
State — from the subjection of an insignificant minority or 
of an absolute majority ; may be imposed by force or 
voluntarily assumed. The industrial proposals of Socialism, 
involving, as has been shown,^ the determination by State 
officials of the time and place in which each member of the 
State shall carry on his industrial activities, as also what 
shall be the nature of the activities which each shall carry 
on, obviously deprive all of them of freedom and establish 
with regard to all one of the essential conditions of slavery. 
The distributive proposal of Socialism, depriving the more 
able and industrious members of the community of a part 
of the result of their labour, establishes, as far as they 
are concerned, the second essential condition of slavery. 
Socialism thus will inflict full slavery on many while in- 
flicting partial slavery on nearly all the members of society. 
Its industrial proposals, therefore, again disregard the 
essential natural rights, the right of each to the freest 
and fullest exercise of all his faculties, limited only by the 
equal right of all others. Socialism, therefore, must reduce 

^ Part I. chaps, ii. and iii. 



246 DEMOCRACY VERSUS SOCIALISM partiii 

the aggregate sum of happiness because it disregards the 
conditions which alone can secure the greatest sum of 
happiness. 

While the law of equal freedom thus forbids the 
conduct of industries in general by the State, it imposes 
upon the State either the conduct of particular industries 
or participation in their results. Such industries are all 
those which cannot be undertaken by an individual or 
body of individuals without a special privilege given by 
the State, a privilege which cannot be granted equally to 
all others. For the grant of such special privileges to 
some is in itself an infringement of the law of equal 
freedom, unless all have an equal opportunity of acquiring 
them, and unless those who are successful give full com- 
pensation to all others for the special privilege accorded 
to them. The same principle, therefore, which imposes 
upon the State abstinence from interference with industrial 
activities in which all can engage, also enforces upon the 
State the duty to conduct, or to frame equitable regula- 
tions for the conduct of, industries which rest upon special 
privileges. 

Such industries, having been fully described,^ need not 
be recapitulated here in detail. Suffice it to say that, con- 
sisting of railways, canals, tramways, roads, and bridges, as 
well as of the supply of water, gas, electricity, hydraulic 
and pneumatic power, all of them are dependent upon the 
grant of special privileges to the use of a continuous track 
of land of exceptionally high value. Involving the use of 
a specially valuable opportunity under a special privilege, 
it is an infringement of the right of equal fre^om and 
equal opportunities to grant such privileges without 
adequately safeguarding the equal right of all others. 
Either such industries must be conducted by society itself 
for the equal benefit of all its members, or society when 
granting such privileges must attach to them conditions 
compelling the grantees to pay to the commimity the full 
annual value which such privilege may at any time possess, 
i.e. the full rental value of the land used for the special 
purpose in question. Which of these two courses is more 

^ Part II. chapt. iv. and v. 



CHAP. VIII RIGHT OF FREE INDUSTRY 247 

advantageous depends upon special circumstances ; but the 
adoption of either would manifestly prevent the infraction 
of the law of equal freedom involved in the grant of more 
advantageous opportunities to some than others can enjoy. 

The ethical line of demarcation between the industries 
which are beyond the interference of the State and those 
which are subject to the control of the State, thus coincides 
with the economic line of demarcation as drawn in Book II. 
chaps, iv. and v. Ethics as well as economics condemn 
the socialistic claim that all industries may rightfully be 
withdrawn from individual control and placed under 
collective control, just as they condemn the claim that all 
industries may rightfully be exempted from social control ; 
enforce the claim that, while it is the duty of society to 
control those industries which involve the grant of special 
privileges, it is equally its duty to abstain from interference 
with industries for the conduct of which no special privilege 
is required. 

Two objections may be raised against this conclusion. 
One is that non-interference by the State with unprivileged 
industries involves the abstention from punishing fraudu- 
lent promises and adulterations. The reply is, that both 
fraudulent promises and adulterations are breaches of con- 
tract, and, therefore, infringement of the law of equal 
freedom. In either case one party to the contract has 
failed to perform the service contracted for, while the 
other has done so. One, therefore, has assumed greater 
freedom than the other, has broken the law of equal 
freedom ; and interference by the State, therefore, is not 
only justified but entailed by the same law which forbids 
general interference. 

The other objection is, that the doctrine of non- 
interference involves the condemnation of factory legis- 
lation, such as the limitations placed upon working hours, 
the sanitary supervision of workshops, the enforcement of 
precautions against accidents. In one sense the validity of 
this objection must be admitted. For, however necessary 
and beneficial such legislation may be as a palliative of 
preceding injustice, it is nevertheless unjust in itself. The 
necessity for such interference with equal freedom arises 



248 DEMOCRACY VERSUS SOCIALISM partiii 

from antecedent interferences with the law of equal 
freedom. The State, in various ways, having given ex- 
cessive power to capitalists by infringing upon the equal 
rights of the majority, has destroyed the power of the 
masses of the people to resist oppression, and is now com- 
pelled to place still further restraints upon freedom in 
order to reduce oppression. 

Those who oppose such irrational remedies while de- 
fending the unjust conditions which give them temporary 
value are themselves acting irrationally. Nevertheless is 
it true that such limitations placed upon the freedom of 
workmen and capitalists alike, in order to counteract the 
excessive power acquired by capitalists, are unjust, and 
unable to permanently and completely remedy the evils 
which have caused their adoption. Such complete and 
permanent remedy can only be found in the restoration of 
equal freedom to all, which, restoring independence to the 
masses, would destroy the excessive power of capitalists, 
and therefore make unnecessary any limitation of it. 
Under conditions such as would arise from the recognition 
of justice, all having free and equal access to natural as 
well as to social opportunities, the competition between 
employers for workers would be as great as, or greater 
than, that between workers for employment. The workers 
being really, and not merely nominally, free to accept or 
decline employment, would themselves be able to insist 
upon proper conditions of employment. Just as now 
there is no necessity to interfere with the freedom of 
English duchesses or of the wives of American millionaires, 
to prevent them from working an undue number of hours 
and compelling their children to do so, so there would 
be no necessity to so interfere with the freedom of other 
women and children if they were really free. That 
necessity exists to-day because the negation of their equal 
right to the natursi and social opportunities for the 
exercise of their faculties makes workers dependent upon 
the will of employers and robs them of the result of their 
labour. When these equal rights are restored to the 
masses of the people, when they can retain for their own 
use the wealth which their labour creates, men will not 



CHAP. VIII RIGHT OF FREE INDUSTRY 249 

consent to work under needlessly insanitary or dangerous 
conditions, nor will they compel wives and children to 
work prematurely and excessively. Even if there are 
some in which the sympathetic feelings are too dormant 
to restrain such selfish actions, the absence of the general 
custom of woman and child labour in factories would be a 
sufficient bar to their being put into practice. 

The limitations on equal and full freedom embodied 
in such factory legislation, being made necessary by ante- 
cedent limitations of freedom, become unnecessary when 
these antecedent interferences are abolished. While they 
may be justified in the present pathological state of society, 
they cannot be justified when, through the establishment of 
justice, a physiological state of society has been achieved. 



^ 



CHAPTER IX 



INDIVIDUALISM 



The poverty of the masses of the people, as well as all 
other social and industrial evils which disgrace our civili- 
sation, are attributed by socialists to an alleged "rampant 
individualism." Individualism, they teach, superseded the 
comparatively beneficent, though primitive, mediaeval 
Socialism, and, substituting the will of the individual for 
the reign of State law, culminated in the degradation of 
the masses of the people, and the oppression practised by 
employers during the second half of the eighteenth and the 
first quarter of the nineteenth century. Its excesses have 
been curtailed since, and some slight alleviation of social 
injustice has been achieved by a partial return to Socialism, 
i.e. by the enactment of laws limiting individual freedom 
both of employers and employed, such as Factory Acts, 
Mines Regulation Acts, and others. A perusal of the 
essays *' Historic " and " Transition to Social Democracy " 
in Fabian Essays clearly yields the above results. The 
following quotations are from the former of these two. 
On page 30 it is stated : — 

" The record of the century in English social history 
begins with the trial and hopeless failure of an almost 
complete industrial individualism." 

On page 60 this allegation is repeated in similar 
form : — 

" With the masses painfully conscious of the failure of 
individualism to create a decent social life for four-fifths 
of the people, it might have been foreseen that indi- 
vidualism could not survive their advent to power." 



CHAP. IX INDIVIDUALISM 251 

This allegation, that " almost complete individualism " 
was the condition recently existing and, but slightly modi- 
fied, continuing at the present time ; that Individualism 
is responsible, actively or passively, for existing social 
injustice and the degradation of the masses of the people, 
is repeated ad nauseam throughout the literature of 
Socialism, and forms the burden of its popular lectures. 
The conclusion invariably drawn is, that the failure of 
Individualism compels the adoption of the only alterna- 
tive system. Socialism. This antithesis imposes on many 
besides the unthinking, yet it is based on a misconception 
of the existing system. Individualism, as a social organi- 
sation, has not so far had a trial, because it has not yet 
existed. Advance there has been from the primitive 
Socialism of earlier times, in the direction of Individual- 
ism ; — an advance which has largely substituted voluntary 
co-operation for compulsory co-operation ; which has 
freed industrial activities from the minute supervision of 
State officials ; and has substituted a partial recognition 
of individual rights for their total denial. But Indi- 
vidualism, the full freedom of each individual, limited only 
by the equal freedom of all others, has never yet been 
reached, and the social injustice now prevailing exists, 
not on account, nor in spite, of Individualism, but through 
limitations of Individualism imposed or acquiesced in by 
the State. 

Social evolution in the past exhibits a concurrent course 
of political and industrial emancipation. The political 
ascendency of chiefs among savage and barbarian tribes 
is accompanied by their industrial ascendency. Industrial 
operations are carried on under their directions ; the 
political authority controls the industrial activities of the 
community, supervises or monopolises exchanges with 
other tribes, and fixes prices. In many, somewhat more 
advanced, communities, the agency exercising this indus- 
trial control is to some extent separated from that exer- 
cising political control. Special " trading-chiefs " evolve, 
who direct the industry and trade of the society. Still 
later, the " trading-chief*' evolves into the government 
officer, selling permission to produce, superintending culti- 



252 DEMOCRACY VERSUS SOCIALISM partiii 

vation, fixing markets and prices, grading goods, and 
generally exercising strict supervision over all industrial 
activities. 

In France, during the feudal period, the territorial 
nobles, lay and clericd, being the political heads, exercised 
control and supervision over the industrial activities of 
the cultivators and artisans, of the slave and the serf, and 
even the partially free classes. Apart from such direct 
control as was exercised by their bailiffs over the culti- 
vators and others engaged on their estates, apart also 
from the industrial monopolies which they reserved to 
themselves, they sold industrial and commercial licences. 
This system was continued by the State, when the sub- 
sequent growth of the royal power concentrated the 
government, to such an extent that it became a legal 
maxim that " the right to labour is a royal right, which 
the prince may sell and subjects can buy." Organised on 
a comprehensive basis by Colbert, the authorisation of 
occupations, dictation of industrial processes, examination 
of products, and their destruction if not approved of by 
State officials, lasted down to the Revolution. 

England, Germany, and the Low Countries, besides 
exhibiting similar features of control by the central 
political authority, show a specially great development 
of industrial control by local political authorities. The 
heads of guilds were identical with the local political 
heads, and the guilds themselves were partly political 
bodies taking part in municipal government. The guilds, 
in their political capacity, restricted the right to labour at 
their respective occupations to their own members ; ad- 
mission was sold for money-payments and services. In- 
fractions of the monopoly of the guild were punished by 
fines and other penalties, and the guild-master dictated 
processes, controlled production, and examined products. 
Purchases and bargains were made in the presence of 
officials, and manufacturing processes were controlled by 
law. 

Social evolution in the field of industry, therefore, as 
well as elsewhere, has been from a primitive Socialism in 
the direction of Individualism. The advance made in this 



CHAP. IX INDIVIDUALISM 253 

particular sphere has been great, but its beneficial effects, 
great and obvious as they are, have been counteracted by 
the persistence of restrictions in other directions. 

The inquiry pursued in the preceding chapters has 
shown the contrasting characters of Individualism and 
Socialism. The essential ethical difference between these 
two systems of social organisation we saw to be as follows : — 

Socialism, denying the existence of individual, natural 
rights, seeks to reconstruct society in a direction opposite 
to its past evolution ; to make the individual absolutely 
subservient to the State ; to deprive him of his equal right 
with all others of exercising his industrial faculties as he 
will, and to compel him to exercise them in such manner, 
time, and place as he is directed ; to annul his right to 
benefit by his own beneficial acts ; and to allot him a reward 
bearing no reference to the service rendered by him. 

Individualism, affirming the existence of equal, natural, 
individual rights, seeks the further evolution of society 
in the direction of its past evolution until society 
shall have become fully subservient to the welfere of the 
individuals composing it ; seeking to attain such general 
welfare through the removal of the remaining infractions 
of the natural and equal rights of all individuals — " the 
freedom of each to exercise all his faculties as he wills, 
provided he infringes not the equal freedom of any 
other " ; the right of each to the fullest opportunities for 
the exercise of his faculties, limited only by the equal 
right of all others ; and the unlimited right of each to 
benefit by his own beneficial acts, reward being propor- 
tioned to service rendered. 

The prevailing condition of the vast majority of every 
people, so far from being that at which Individualism aims, 
is practically identical with that which Socialism proposes 
to make general. They are not free to choose their occu- 
pations, because in the one direction private ownership of 
land, in the other the cost of a smtable education, closes 
many occupations to the masses of the people ; they have 
no full and equal opportunity, frequently no opportunity 
at all, for the exercise of all their faculties, for the same 
reasons ; and private ownership of land and monopolies 



254 DEMOCRACY VERSUS SOCIALISM part hi 

deprives them of the beneficial results of their acts, and 
reduces their reward to below the value of the services 
which they render. Individual freedom exists, but, far 
from being equal and general, it is confined to a small 
minority of every people, to whom the rest have been sub- 
jected and made tributary by organised society — the State. 
Organised society having established these infractions of 
equal rights, likewise now maintains them, and it is, there- 
fore, social action, the unjust action of the State, which is 
responsible for the evils which flow from them. Not 
such approach to Individualism as has arisen in the slow 
evolution of social organisation, but the survival of 
primitive Socialism, is the cause of existing social injustice. 

Individualism, regarding the State as a means towards 
an end ; holding that end to be, not the greatest happi- 
ness of the greatest number, but the greatest possible 
happiness of all the members of the State ; holding further 
that this end can be subserved by the State in no other way 
than by the maintenance of " the freedom of every one 
to do all he wills, provided he infringes not the equal free- 
dom of any other," — accuses the State of sins of omission 
as well as of sins of commission. Interfering where its 
interference infringes upon the equal rights of all, the 
State fails to interfere where such interference is necessary 
to maintain the equal rights of all. It fails to carry on 
some of the industries which rest upon special privileges, 
and to procure adequate compensation for the conmiunity 
with regard to others ; it fails to establish equal oppor- 
tunities of justice by making judicial trials free of charge ; 
it fails to procure equal opportunities for the acquisition 
of knowledge by making education free in all its branches ; 
in these and in hundreds of minor ways the State has so 
far failed to assume the functions incumbent on it for the 
maintenance of equal rights and freedom, while in many 
other ways, the most important of which alone have been 
examined, it has assumed functions which unjustly curtail 
individual freedom and establish inequality of rights. 

Social injustice, therefore, prevails, not on account, 
nor in spite, of Individualism, but through the absence of 
Individualism, through the active and passive disregard of 



CHAP. IX INDIVIDUALISM 255 

equal individual freedom by the State. The removal of 
social injustice, therefore, is not to be obtained by still 
further interference with equal individual freedom, and 
still less by the abolition of individual freedom which 
Socialism contemplates ; it can be obtained only by the 
removal of all interference with individual freedom which 
exceeds that necessary for the maintenance of equal free- 
dom for all. 

This conclusion is not invalidated by the admission that 
remedial measures involving further restrictions of indivi- 
dual freedom, such as those already alluded to, may have 
had beneficial results. For if State limitations of indi- 
vidual and equal fi-eedom have deprived the majority of 
the people of independence and power to resist capitalistic 
oppression, as they have done and are still doing, restric- 
tions placed upon the oppressors, otherwise unnecessary, 
may to some extent alleviate the oppression. Neverthe- 
less it is clear that such consequential interferences would 
be unnecessary if, through the removal of the original 
interferences, the balance of power were restored. At 
their best, moreover, they are merely attempts to alleviate 
symptoms without touching the cause of social disease. 

A true view of social conditions and their causes, how- 
ever, cannot be obtained by the examination of existing 
causes alone ; past causes also must be taken into account. 
For in the evolution of social life, as in the evolution of 
life in general, results do not disappear with their causes, 
but persist beyond them, and may, in their turn, become 
causes of further results. The hereditary character of the 
race under the influence of external conditions produces 
its customs and laws ; but these laws and customs in their 
turn modify character and conditions. Past infringements 
of equal freedom, therefore, join existing infringements, as 
still active causes of social injustice. Let us then glance 
at some of these past actions of the State in Great Britain, 
which, though now discontinued, have contributed to the 
existing degradation of the masses of the people in the 
mother country and in her colonies. 

The origin of the modern machine industry is contem- 
poraneous with the state of greatest degradation of the 



256 DEMOCRACY VERSUS SOCIAUSM partiii 

working classes in Great Britain. For 400 years and more 
the State, in which first the great landowners and subse- 
quently landowners and great capitalists held the dominant 
position, had been engaged in undermining the industrial 
independence of the peasant and artisan class, through the 
confiscation of their individual and collective property in 
the soil and of their trade-funds ; through depressing their 
wages and increasing the price of the necessaries and 
comforts of life ; through prohibiting their freedom of 
movement and combination. 

Professor Thorold Rogers states : — 

** The pauperism and the degradation of the English 
labourer were the result of a series of Acts of Parliament 
and acts of government, which were designed or adopted 
with the express purpose of compelling the labourer to 
work at the lowest rates of wages possible, and which 
succeeded at last in that purpose." ^ 

And also : — 

"I contend that from 1563 to 1824 a conspiracy, 
concocted by the law and carried out by parties interested 
in its success, was entered into to cheat the English work- 
man of his wages, to tie him to the soil, to deprive him of 
hope, and to degrade him into irremediable poverty. . . . 
For more than two centuries and a half the English law, 
and those who administered the law, were engaged in 
grinding the English workman down to the lowest pittance, 
in stamping down every expression or act which indicated 
any organised discontent, and in multiplying penalties upon 
him when he thought of his natural rights." * 

An enumeration of a few only of the principal measures 
designed to deprive the labouring classes of their rights, 
and to degrade them to virtual slavery, will show that 
these indignant statements are warranted by fact. 

The right to accumulate land xmder settlements, dating 
from the Norman Conquest and prolonged as a conse- 
quence of the Wars of the Roses, as well as the ready 
acquiescence of corrupt judges in illegal conveyancing 
tricks, have made land artificially scarce and dear to the 
mass of the people who want to use it. 

^ Six Centuries oflVork and Waget^ p. 6. * Ibid, p. 398. 



CHAP. IX INDIVIDUALISM 257 

By successive Enclosure Acts the common land of 
England was handed over to the lords of the manor, 
and the people, deprived of their immemorial right to the 
rent-free use of the greater part of English soil, were 
made dependent upon wage-labour as their sole means of 
existence.^ 

The confiscation of Church lands in 1536, 1539, and 
1548, and their bestowal upon private persons, deprived 
the people of funds used to a considerable extent for 
educational and charitable purposes, and hastened the rise 
in the rental of agricultural land which first impoverished 
and ultimately extinguished the yeoman class. 

By the substitution of excise for feudal dues, 12 
Charles II. 1660, and the Redemption Acts of 1692 and 
1798, the whole system of land tenure and taxation was 
revolutionised. Instead of tenants of the Crown, the 
landholders now became landowners ; and instead of the 
expenditure of the government being defrayed out of the 
rent which they paid for their land, it was now met out 
of taxes placed on the labour and consumption of the 
whole people. As if to leave a permanent record of their 
turpitude, the landowners left upon the Statute-book the 
rudiment of their former obligations in a land-tax of 4s. 
in the pound of annual value — on the valuation of 1692. 

The destruction of the guilds and confiscation of their 
property by Henry VIII. deprived the artisan class of the 
advantage of these " fi-iendly society " funds, from which 
they had largely obtained support in youth and old age, 
loans, widows' allowances, and apprentice fees for their 
sons. 

The debasement of the coinage by Henry VIII. and 
Edward VI. " was potent enough to dominate in the 
history of labour and wages from the sixteenth century to 
the present time, . . . for sixty years prices were more 
than doubled, while a very miserable increase was effected 
in the wages of labour." * 

While these enactments deprived the labouring masses 

^ For a list (not full) of Enclosure Acts, see Cunningham, England^s Industry and 
Commerce^ p. 476. He enumerates 343 1 separate Acta in addition to the general Act 
of 1801. 

'^ Rogers, Six Centuries, pp. 345, 346. 

S 



258 DEMOCRACY VERSUS SOCIALISM partiii 

of all power of independent employment, fastened the yoke 
of landlordism on their neck, and accustomed them to a 
lower standard of life, other measures, aiming more directly 
at their degradation, were devised in plenty. 

The Statute of Labourers, 22 Edward III. 1349 — 
constantly re-enacted in subsequent reigns with increased 
penalties both on labourer and employer — fixes the maxi- 
mum wages of labour at those customary in 1 347, both 
for agricultural labourers and artificers, and makes their 
refusal to accept employment at these wages a punishable 
oflFence. 

Statutes of Henry VIII., Elizabeth, and James I. visit 
refusal to work for wages practically fixed by a council of 
employers, with slavery, branding, whipping at the cart- 
t^l, and ultimately death. 

The Acts of Settlement 13, 14 Charles II. and 8, 9 
William III., forbidding the labourer to leave his parish, 
made him, for all practical purposes, once more the serf 
of the local landowners. 

Numerous Acts, beginning with 33 Edward I. 1305, 
and continuing to the beginning of the nineteenth century, 
forbade labourers, under savage penalties, to combine for 
purposes which might affect the conditions under which 
their labour was sold and purchased. 

While the wages of labour were thus depressed directly 
and indirectly by legislative enactments, the labourers* 
food, clothing, and all other necessaries of life were largely 
increased in price by so-called protective legislation, of which 
the detested Corn Laws were only the most prominent. 

These, as well as other long-continued efforts to enslave 
the working classes of England, bore fruit at last in their 
abject condition during the second half of the eighteenth 
and the first half of the nineteenth century. Utterly im- 
poverished and pauperised, starved physically and morally, 
they found themselves suddenly confronted with new in- 
dustrial conditions which, substituting factory for home 
work, concentrated industry in the hands of a comparatively 
small number of employers. The State had done its work 
so well, that the workers had no power of resistance left ; 
could not possibly raise themselves out of the abyss into 



CHAP. IX INDIVIDUALISM 259 

which they had been thrust by the State itself. The only 
hope of ameliorating their condition, therefore, lay in 
remedial action by the State, i.e, legislation which should 
remove some of the laws through which they had been 
enslaved, or which should mitigate some of the worst 
symptoms of this State-created slavery. 

Fortunately for the peace of Great Britain, the rivalry 
between the capitalistic and landowning classes enabled a 
few far-seeing or philanthropic reformers to induce the 
State to thus mitigate the disasters which its own action 
had deliberately provoked. In Great Britain, where the 
earlier development of machine -industry had intensified 
these evils more than elsewhere, this reaction also found 
its earliest expression in Factory Laws, Mines Regulation 
Acts, Truck Acts, the repeal of Anti-Combination Laws, 
of laws fixing wages, and of laws of settlement, as well as 
in the re-establishment of Free Trade. But though these 
beneficial enactments have removed some of the causes 
and mitigated some of the symptoms of the degradation 
of the working classes, other and far more powerful causes 
of this degradation remain in full force, while others have 
been added since. The recovery, wonderful as it is, has 
therefore been partial, and cannot become complete till 
after the removal of the remaining limitations of and en- 
croachments on equal individual rights. Moreover, as in 
social matters the removal of a cause is not followed at 
once by a cessation of its effects, the long-continued re- 
pressive action of the State has lowered the moral standard 
of the masses of the people, largely preventing the co- 
operative action now open to them, and has established a 
customary standard of wages and working hours which it 
has taken fifty years of comparative freedom to modify, 
but which has not yet been broken through. 

The continued action of past interferences with the 
equal natural rights of all, thus combines with the inter- 
ferences stiU maintained to produce the prevailing social 
injustice. Individualism, by removing the interferences 
still existing, seeks so to stimulate social life that it may, 
in due time, cast out the evil results which have flowed from 
both. As the past and partial social evolution has been 



26o DEMOCRACY VERSUS SOCIALISM part hi 

in the direction of better maintenance of equal individual 
rights, as a gradual diminution of social injustice and of 
the degradation of the people has accompanied this gradual 
approach towards Individualism, so further evolution in 
this direction must produce further amelioration ; and the 
complete organisation of society on individualistic lines, on 
the maintenance of the fullest freedom of each limited 
only by the equal freedom of all others, must ultimately 
remove social injustice and give to all the opportunity of 
leading higher and nobler lives. 



I 



PART IV 



THE OUTCOME OF SOCIALISM 



CHAPTER I 

THE UNCONSCIOUS GROWTH OF SOCIAL STRUCTURES 

A WANDERING tribe of savages is merely a transitory 
assemblage of human beings. Possessing no social 
Structures, no framework around which its units can 
cluster, the horde can and does easily divide into parts, each 
of which henceforth leads a separate existence. Increase of 
numbers, scarcity of food, dissensions, frequently provide 
the occasion for such division, and the resulting smaller 
groups carry on their lives as easily as before. 

This transitory human assemblage becomes a social 
organism when, and in so far as, it acquires separate 
structures. As these structures increase in number and 
definiteness, social life increases in coherence. For the 
multitudinous parts of the social organism, each performing 
a separate function necessary to the full life of the whole, 
are then bound together by mutual dependence. Separa- 
tion into parts then becomes impossible, because the parts, 
though distinct, are dependent upon reciprocal aid for the 
continuance of their lives. 

Social evolution, like all evolution, therefore, proceeds 
by the gradual accumulation of small changes, from the 
structureless state, through a state of few and vague 
structures, to a state of multiform and definite structures. 
Among savages there is no unlikeness of occupations 
except that which is imposed by difference of sex. Every 
adult male is a hunter, warrior, armoxirer, and builder. 
Every adult female digs roots, catches fish, prepares skins, 
and acts as a beast of burden. 

Civilisation, even of the most rudimentary kind, pre- 



264 DEMOCRACY VERSUS SOCIAUSM part iv 

supposes some division of labour, and advances as these 
divisions multiply. Farmers and agricultural labourers, 
manufacturers and operatives, wholesale and retail dealers 
and their employees, the several professions and the various 
government J agencies, as well as innumerable other divi- 
sions and their several subdivisions, form differentiated but 
mutually dependent groups, making the social organism 
variegated in the highest degree. Groups of men are thus 
made unlike each other by the discharge of unlike functions 
in maintaining the lives of all. 

This multiplication of social structxires is accompanied 
by a like growth in the definiteness of each of them. In 
civilised societies each group, carrying on separate and 
differentiated occupations, is clearly defined and specialised. 
The inhabitants of towns no longer cultivate fields ; 
farmers no longer spin their own yarn and weave their own 
clothes, are now abandoning even the making of butter. 
Nor do weavers now carry on agriculture as a subsidiary 
means of earning a livelihood ; goldsmiths no longer act 
as bankers, nor builders as architects. Nay, the process of 
specialisation has proceeded so far that special groups devote 
themselves to the making of parts of things only. 

This multiplication of increasingly definite structures 
results in greater interdependence and consequently greater 
coherence. Each structure as it becomes more efficient in 
the discharge of its particular function becomes less capable 
of performing any other function. Each structure, there- 
fore, depends for the efficient discharge of its function 
upon the efficient discharge of their respective functions by 
all other structures. The groups which carry on mining, 
manufacturing, transporting, and exchanging, as well as 
those discharging other social functions, depend upon the 
agricultural group for their food supply ; while the 
agricultural group would be unable to efficientiy produce 
food without the assistance of the mining, manufacturing, 
transporting, and exchanging groups. Similarly all forms 
of manufactures depend upon mining and agriculture for 
the supply of raw material ; while mining depends again 
upon manufactures for its machines, tools, explosives, and 
other necessaries. Similarly close is the interdependence 



CHAP. I SOCIAL STRUCTURES 265 

of the various groups of manufactures, and their dependence, 
as well as that of all other producing groups, upon the 
transporting and exchanging groups. The latter, con- 
ditioned in its turn by the producing groups, has evolved 
interdependent groups of wholesale and retail dealers, 
brokers and agents, and the existence of this exchanging 
system implies the existence of roads, railways, canals ; of 
vehicles, ships, and boats ; of posts, telegraphs, and tele- 
phones ; and of the separate organisation of the carrying 
trade. The development of this system of transport and 
communication is in its turn conditioned by and dependent 
upon that of the various producing groups and of the 
exchanging organisations which connect them with each 
other and with those social groups which provide for 
the satisfaction of other than material desires. All this 
mutual dependence upon reciprocal aid is made possible 
by the existence of still other groups, which, ensuring 
efficient defence against external and internal aggression, 
are in their turn maintained by the effiDrts of all other 
groups. 

A social organism is thus a highly complex compound 
of multitudinous, specialised, interdependent, and mutually 
conditioned structures akin to those of which animal 
organisms are compounded. And as, when in animal 
organisms any structure ceases to perform its functions, 
there results either the cessation of the performance of their 
respective functions by all other structures, i.e. death, or 
at least such a strain on other structures as adversely 
affects the whole organism, so like results follow if any 
social structure ceases to perform its functions. And as 
no structure of any animal organism can carry on its 
activities when separated from the rest, so are the groups 
forming each social structure unable to carry on their 
activities when separated from all other groups. 

This growth in the number and definiteness of 
structures is not confined to the industrial life of a nation. 
The chief of a small tribe may easily perform all govern- 
mental functions while producing his own sustenance. 
When, however, the social organism has grown into a 
compound of several tribes, the greater number of the 



k 



268 DEMOCRACY VERSUS SOCIALISM partiv 

British Constitution, nay, of the British Empire itself, as 
well as the spontaneous growth of law and the equally 
spontaneous differentiation of the several departments of 
government, are now accepted facts, and are similarly true 
of every other nation. Not the will of individual rulers, 
of the great men of history, but the natures of the individual 
citizens, as derived through heredity and conditioned by 
the past history of the race, and the conditions now 
surrounding them, determine the form and character of the 
government of every nation. 

A survey of the field of social structures thus shows 
that human society is an ever-changing organism, owing its 
growth to no premeditated plan, but to the spontaneous 
action of the units which compose it ; each of whom, 
efficiently seeking to gratify his own desires, unconsciously 
contributes to the gratification of others' desires and to the 
ever-changing structural organisation of the society to 
which he belongs. The governing agencies, themselves the 
outcome of this unconscious action, may in some directions 
modify this spontaneous growth. Compared with the 
innumerable instances of hindrance of social growth by 
governmental interference, those which show furtherance 
are very rare. 

Socialism disregards the history of social evolution, the 
unconscious growth here inadequately sketched ; involves 
its discontinuance and the substitution for it of a conscious 
and premeditated further evolution. For if the State 
conducts all industries, future changes in the organisation 
of industries can only be made under the direction of the 
State. No longer would changes of structures result from 
spontaneous individual action directed towards the satis- 
faction of individual desires. Such changes could then 
come only from State action consciously directed towards 
structural changes. And as the State conduct of industries 
and equality of distribution involve the control by the 
State of the professions, of all scientific and artistic bodies, 
in fact of all social structures, no changes in any of them 
could arise except through the conscious action of the 
regulative agency. Unconscious evolution would thus be 
supplanted by consciously directed evolution throughout 



CHAP. I SOCIAL STRUCTURES 269 

the social organism. Can the latter process supply an 
efficient substitute for the former ? 

As in all other organisms, the gradual and spontaneous 
evolution of structures serviceable to human society is 
equalled by the gradual and spontaneous decline of 
structures no longer serviceable. The evolution of new 
and more serviceable structures frequently displaces older 
and less serviceable structures, while it may stimulate the 
growth of other structures. 

Thus the growth of the bicycle industry has adversely 
affected various other industries, as the manufacture of 
pianos, of music, and of silken fabrics, while stimulating 
that of certain woollen dress materials. The manufacture 
of matches has put an end to that of steel, flints, and 
tinder ; the manufacture of coal-tar colours has reduced 
the cultivation of indigo and madder, and the preparation 
of cochineal ; the rise of mechanical weaving almost 
annihilated hand-loom weaving ; and railways have largely 
displaced the transport of goods and passengers over 
roads. 

The accumulation of knowledge, of discoveries and 
inventions, is partly the result and partly the cause of 
structural evolution. The gradual improvement of primi- 
tive tools into modern machinery would have been im- 
possible in the absence of differentiation of occupations ; 
and each improvement in implements and processes has 
made possible, if not necessary, further differentiation. As 
long as a spinning-wheel and simple hand-loom were the 
most efficient implements in general use for the conversion 
into fabrics of wool, flax, and cotton, a farmer's wife and 
daughters could usefully devote some of their time to 
spinning, while weavers could, with equal advantage, use 
their unemployed time in agriculture. But the invention 
and extended adoption of spinning machinery and power- 
looms made such subsidiary occupations economically dis- 
advantageous. Specialising and extending the spinning 
and weaving industries, these inventions also rendered the 
occupation of farming more specialised. Similarly, the 
invention of cream-separators, while specialising and ex- 
tending the manufacture of butter, has, by reducing the 



270 DEMOCRACY VERSUS SOCIALISM part iv 

manufacture of home-made butter, stiU further specialised 
the occupation of farming. 

While thus furthering the specialisation and growth of 
existing structures, inventions and discoveries cause the 
rise of new and additional structures. The numerous 
groups engaged in the manufactxire of electrical appliances 
and in the supply of electric light and power ; those who 
are engaged in the manufacture of bicycles, of motor-cars, 
and of refrigerating machinery ; others which supply frozen, 
desiccated, compressed, and tinned foods, — are recent ex- 
amples of this causation. 

Change in demand, induced by the supply of new and 
more useful services or by mere changes in desire, is the 
proximate cause of the growth of structures, either in 
addition to or at the expense of other structures. Thus 
changes in desire have reduced the mohair industry to 
meagre proportions, while fostering the manufacture or 
cashmeres, and have almost terminated the manufacture 
of crinolines and roller-skates. 

Change in demand is, however, not the ultimate cause 
of the evolution of new structures. For before a change 
in demand, or an additional demand, can arise, the de- 
manded thing must be known. Some supply must, there- 
fore, precede demand. Hence, new structures are created 
by individuals or groups of individuals, who endeavour by 
the production of some new thing to satisfy their desires 
with less exertion. If the new structure proves serviceable 
to others, their increasing demand causes its growth and 
may consequently cause the decline or disappearance of 
other structures. If the new structure prove unserviceable, 
the absence of demand rapidly causes it to disappear again. 
But it is of importance to observe, that before the new 
structure can prove its utility, it must have begun to dis- 
charge its functions. Change in demand, therefore, while 
inducing alterations in the relative size and importance 
of existing structures and the disappearance of useless 
structures, cannot be the originating cause of new struc- 
tures. The origin of new structures is due to the initia- 
tive of intending suppliers. While not undervaluing 
the importance of the structural changes induced by the 



CHAP. I SOCIAL STRUCTURES 271 

former cause, it is nevertheless evident that those induced 
by the latter are of greater importance. 

Structural changes, due to the action of individual 
suppliers, are impossible in the socialist State. As all 
industries are managed by the State, inventions and dis- 
coveries can only be adopted by the governing agency. 
This change, combined with equality of reward, must 
reduce to a minimum the most important feature of social 
growth, the addition of new structures and the super- 
session of old structures by new structures. 

As every man and woman must be compelled to work 
at his or her appointed task a given number of hours 
every working day, the researches and experiments which 
result in discoveries and inventions would be largely re- 
stricted. No one, except those appointed by the State to 
do such work, could carry on researches and experiments 
during working hours, and all other intending discoverers 
and inventors would, therefore, be restricted to their spare 
time for such work. At the same time no private person 
would possess the necessary means for lengthy and costly 
researches and experiments. By far the greater part of 
the inventive and scientific genius of the nation would 
thus be rendered fruitless. 

Moreover, the remainder would be rendered less finiitful, 
because Socialism would withdraw the most powerful 
motive, or at least one of the most powerful motives, which 
induce men to devote their energies to the invention of 
new processes and implements. For as equality of 
material reward is one of the fundamental tenets and 
an absolute necessity of Socialism, inventors and discoverers 
could not receive any pecuniary reward for additions to 
the wellbeing of society, however great these might be. 

Socialists generally maintain that, in the absence of 
such pecuniary reward, men would be impelled to make 
discoveries and inventions, partly by the necessities of 
their nature and partly by the honourable distinction which 
success would confer upon them. However true this may 
be of some exceptional men, it cannot be true of all 
inventors and discoverers. Moreover, even in the case 
of the exceptions, the impossibility of obtaining any 



272 DEMOCRACY VERSUS SOCIALISM partiv 

material reward obviously withdraws one of the main 
motives which stimulate their efforts. Two causes would 
thus be active in reducing the number of those who other- 
wise would devote their labour to the mostly thankless 
task of improving the appliances and methods of industry. 
Fewer men therefore would do so, and these would be 
impelled less powerfully in this direction. Hence the 
number of inventions and discoveries would be enormously 
reduced. 

At the same time the adoption of such discoveries 
and inventions as might still be made would be largely 
hindered. The adoption of new processes and appliances 
frequently involves the discarding of existing processes 
and appliances. Employers are loth to do so, on account 
of the pecuniary sacrifice involved, and workmen generally 
object to change the system of working to which they 
have been accustomed. The stimulating action of com- 
petition overcomes these obstacles. The employer who 
first adopts an invention or new process does so in the 
expectation of gaining an advantage over his competitors ; 
while other employers subsequently adopt it in order to 
minimise the advantage which the former has gained. 
Workmen waive their objection, either in response to the 
expectation of higher earnings, or forced by the insecurity 
of employment. 

None of these motives actuates the officials of the State. 
They can gain no personal advantage from the adoption 
of inventions and discoveries which must impose upon 
them additional exertion and responsibility and may expose 
them to unpopularity, not only on account of the expense 
involved, but also on account of resulting changes in 
working methods. 

Moreover, inventions do not generally spring perfect 
from the brain of man. On the contrary, when any 
industrial difficulty invites the application of inventive 
genius, many unsuccessful attempts at its solution generally 
precede the successful one. The successful inventor, how- 
ever, has almost always profited by the failures of his 
predecessors. As a socialist writer ^ happily expresses it : — 

^ John A. Hobson, Evdution of Modern Capitalitm^ P* 57* 



CHAP. I SOCIAL STRUCTURES 273 

" The earlier increments of a great invention make no 
figure in the annals of history because they do not pay, 
and the final increment which reaches the paying point 
gets all the credit, though the inherent importance and 
the inventive genius of the earlier attempts may have been 
as great or greater." 

This almost certainty of many fdlures before a suc- 
cessful solution can be found must still further discourage 
State oflSicials from adopting inventions. They would be 
blamed for failures while another might reap the praise 
for success to which their failures had contributed. It 
would be far safer to do nothing than to run this risk. 
Hence, to the absence of all inducement to experiment 
with new inventions there are added several motives on 
the part of officials, supported by widespread motives on 
the part of regulated workers, discouraging the adoption 
of inventions. Not only the inertia of officials, but their 
active opposition and that of the units composing the older 
structures, has to be overcome, before a new structure can 
arise or an old structure be removed. Those who oppose 
the adoption of new processes and appliances are numerous, 
organised, and consequently powerful ; while those who 
urge it, having mostly no personal interest to serve, are 
few, unorganised, and therefore comparatively powerless. 
The opposition, moreover, has a powerful argument in the 
uncertainty of success of the contemplated change, which 
as yet has no practical proofs to oflFer. Under such cir- 
cumstances, officials wedded to routine and dreading 
additional trouble and responsibility will generally decide 
in favour of things as they are. 

Even at the present time, when the example or com- 
petition of private industry stimulates the action of State 
officials, their adoption of inventions and discoveries lags 
far behind. Innumerable examples might be quoted of 
State departments refusing for many years to use processes 
and appliances which privately conducted industries had 
proved to be advantageous. This tendency of State 
departments to remain in a groove is so distinct and 
universal that it has become proverbial. Yet this tendency 
must be infinitely greater under Socialism, on account of 



274 DEMOCRACY VERSUS SOCIALISM part iv 

the total absence of the stimulus which the existence of 
private industries provides. 

Not only would Socialism largely reduce the discoveries 
and inventions which produce new industrial structures 
and supplant older ones, but it would also raise almost 
insuperable obstacles to the adoption of those which 
would still be made. It would, therefore, largely hinder 
if not entirely prevent the further growth of the social 
organism. 

One more consideration must be glanced at. In the 
rare cases in which the predisposition of some powerfiil 
official might overcome these obstacles, another danger 
arises. As already pointed out, the growth of a new 
structure frequently involves the decline of one or more 
other structures. When demand is free, the growth of 
the new and the decline of the old structure can only take 
place on condition that the former is more serviceable 
than the latter. The whole body of consumers determines 
this question ; and if their verdict is unfavoxirable to the 
new structure, it disappears. Under Socialism, howevei, 
the body of consumers is not free to give a verdict. The 
administration may cease to produce an old and preferred 
article in favour of a new and less acceptable one. Yet 
the consumers will be compelled to accept the latter in 
place of the former. Or — and here the danger is greater 
still — the administration may supersede a less laborious 
and costly process by one more laborious and costly. 
Neither the consumers nor any other agency could prevent 
such action. There is, therefore, no guarantee imder 
Socialism, such as is now provided by the action of com- 
petition, that new structures would be more serviceable 
than the older structures which they displace. Not only 
would the evolution of new structures be rare, but such 
as did evolve might result in retrogression instead of 
progression. 

There remains to be considered the influence of the 
socialist State on the alterations in the relative size and 
importance of structures which originate in changes of 
demand. Considerations advanced in the last paragraph 
show that, in the absence of private and competing in- 



CHAP. I SOCIAL STRUCTURES 275 

dustries, consumers are compelled to accept such goods 
and services as the State supplies. Freedom of demand 
would, therefore, be seriously restricted, and changes in 
the relative growth of structures would no longer be 
determined by their relative utility as proved by the action 
of individuals desiring their services. Such changes might 
be determined by the will of officials who might err as to 
the relative utility of structures, or who might be actuated 
by other considerations. 

Nay, the State will be compelled largely to disregard 
the utility of structures as shown by the infallible test of 
demand, and will be compelled to abolish multitudinous 
structures which render social services. In order to 
regulate supply, the central regulative agency must 
determine how much of every kind and quality of goods 
will be required and shall be produced. Changing 
individual tastes and changing fashions render it impossible 
to make an even approximately correct calculation, while 
the regulative influence of changing values is lost. There- 
fore, the State would be compelled to abandon the infinite 
variety of qualities, designs, and colours which private 
industry supplies under the pressxire of individual tastes. 
The desires of the consumers would be disregarded, the 
products of State industry would be confined to as few 
qualities, designs, and colours as possible, and these would 
inevitably become permanent. Not only would changes 
in the relative growth of structxires be reduced, but the 
number of soci^y useful structures would be diminished. 
This diminution would, moreover, be added to by the 
disappearance of all those structures which subserve the 
wants of the wealthier classes. 

The reduction in the number of socially useful 
structures and subsequent stagnation would, however, 
extend beyond the industrial field. As previously pointed 
out, science, art, and literature must be placed under State 
regulation if equality of remuneration is to be maintained. 
Not those best qualified, but only those selected by the 
regulating agency, would follow these pursuits. Instead 
of the eager and vigorous scientific, artistic, and literary 
life of to-day, with its ever multiplying and expanding 



276 DEMOCRACY VERSUS SOCIALISM part iv 

structures, there would arise Egyptian and Chinese con- 
ditions of barren formalism, monotony, and stagnation. 
A free press is likewise incompatible with the fundamental 
tenets of Socialism. The production of newspapers, like 
every other form of production, must be carried on by 
the State through paid officials. An enormous reduction 
in the number of daily, weekly, and monthly journals, and 
the utmost servility of the remaining ones, would thus 
be inevitable, reducing periodical literature to the same 
barrenness and stagnation as that inflicted upon general 
literature, science, and art. 

The growth of a social organism, like that of all other 
organisms, is conditioned by the flexibility of its structures. 
Where permanency of structure has been attained, the 
growth of the organism ceases ; where growth ceases, 
decline begins. The permanency and want of flexibility 
of structures which have been shown to be inevitable in the 
socialist State would, therefore, not only lead to the cessation 
of all further social progress, but to the loss of much of the 
progress achieved in the past. Stagnation, rapidly to be 
followed by retrogression, therefore, would be the lot of 
the nations, who, lacking the courage to undergo the 
strenuous exertion which the wellbeing of the race demands 
of them, would seek an inglorious repose in the enervating 
embrace of Socialism. 



CHAPTER II 

THE UNCONSCIOUS DISCHARGE OF SOCIAL FUNCTIONS 

The separate and unlike structures of the social organism, 
like those of all other organisms, discharge separate, unlike, 
and interdependent functions. The due performance of its 
function by one structure is conditioned by the due per- 
formance of their respective functions by other structures. 
Thus, that the manufacturing groups may produce, a due 
supply of raw material and food must be supplied to them 
by the extracting groups, which process is dependent upon 
the supply by the manufacturing groups of machines, tools, 
various prepared materials, clothing, and like necessaries. 
This, as well as all the other interchanges, cannot be carried 
out without the due discharge of their functions by the 
transporting and exchanging groups, which, again, is 
dependent upon their being supplied with food, clothing, 
and other necessaries by the extracting and manufacturing 
groups. 

The interdependence of functions here indicated per- 
vades the whole social organism in endless ramifications, 
and, stretching beyond national limits, combines all the 
nations of the earth into one larger social organism. 
Growing in extensity, it also grows in intensity. For, as 
structures multiply, each becomes more specialised with 
regard to the function which it discharges, and increased 
specialisation renders the discharge of other than the 
habitual function more difficult and ultimately impossible. 
The due discharge of any function thus becomes more and 
more dependent upon the due discharge of all other 
functions. Should any function remain undischarged, the 



278 DEMOCRACY VERSUS SOCIALISM partiv 

life of the social organism is rendered less full and may 
even be extinguished. The reciprocal aid resulting from 
the due discharge of mutually dependent functions by the 
several structures is co-operation in its highest form. 

All increase in the power of man over that with which 
nature endows the individual comes from the co-operation 
of individuals, from the co-ordination of their efforts 
towards a conmion end. The co-ordination of efforts may, 
however, take place consciously or unconsciously. 

Where there is no differentiation of structures there is 
little interdependence and co-operation. Among savage 
tribes co-operation is consequently mainly confined to the 
activities involved in war and hunting. The activities 
co-ordinated for these purposes in order to be effective 
must be guided by the will of one man towards a pre- 
meditated end. The immediate object aimed at being the 
benefit of the tribe as a whole and not that of any 
particular individual, participation in this form of co- 
operation becomes compulsory. This trait of compulsion 
is an inherent necessity of all co-operation which is con- 
sciously directed towards public ends, i.e. of all co-operation 
directed by governmental agencies. The organisation and 
regulation of an army displays it most clearly. Not only 
must the State, if necessary, be able to enforce the participa- 
tion of all fit individuals in military activities, but the army 
must be so organised that the will of the supreme commander 
makes itself felt throughout all ranks. Implicit obedience 
to the orders of superiors being an indispensable condition 
of efficiency, individual volition must be disregarded, and 
abstention from co-operation must entail punishment. 
Similar compulsion distinguishes the organisation spreading 
through the whole body of society, which either enforces 
actions deemed necessary for the wellbeing of society or in- 
hibits actions deemed detrimental to the wellbeing of society. 

Closely akin to this socially organised co-operation is 
that kind of industrial co-operation which by a similar 
combination of individual efforts aims at the accomplish- 
ment of tasks which exceed the physical power of the 
individual. Whether the result aimed at is the simple one 
of moving an object too heavy for the physical power of 



CHAP. II SOCIAL FUNCTIONS 279 

any one of the co-operators, or whether it is the infinitely 
more complicated one of altering the course of a sailing 
vessel, this kind of industrial co-operation involves the 
subjection of many wills to one will in the conscious 
achievement of a common and premeditated object. 

All co-operation which consists in the combination of 
efforts, therefore, has the following traits : — ( i ) The 
common object and not the individual benefit of the 
co-operators is consciously and immediately aimed at. 

(2) Efficiency requires the subjection of the individual 
volitions of the many to the will of a regulative agency. 

(3) Except in its simplest forms such co-operation is 
compidsory also in the sense that those who engage in it 
are not free to abandon it when and where they please. 

(4) It neglects to utilise the mental power of the 
regulated many, and utilises their physical power alone 
under the mental direction of the regulators. 

While this form of co-operation has its social uses in 
securing certain limited results, it fails to secure others 
which involve a longer series of more delicate and com- 
plicated conjoint actions. Whenever, in the course of 
social growth, individuals find their wants better satisfied 
by exchanging goods which they can make best, or services 
which they can perform best, for other goods or services in 
the making and rendering of which they are less skilled, or 
for which they are less suitably circumstanced, there arises 
a different kind of co-operation which consists of the 
separation of efforts. This separation of efforts enables 
one individual to perform for many individuals tasks, 
each of which does not require the full power of an 
individual. When, for instance, one specially skilled in 
the making of weapons confines his efforts to the object 
of making weapons for many, he relieves these others of a 
task which does not require the fidl power of each of them. 
Lacking the special aptitude of the one, and still more the 
added skill which constant repetition of a given action 
evolves, the many find it advantageous to obtain weapons 
from the one. Confining themselves to pursuits for which 
they possess special aptitudes, they also acquire additional 
skill by repetition, and, exchanging part of the produce of 



28o DEMOCRACY VERSUS SOCIAUSM partiv 

their skilled labour for part of the produce of the skilled 
labour of the weapon-maker, the desires of all are satisfied 
more skilfully, i.e. the desires of all of them are satisfied 
with less exertion, or an increased number of desires can be 
satisfied without increase of exertion. 

The advantages thus derived from co-operation through 
the separation of efforts cause the gradual evolution of 
the social organism from the state of few and vague 
structures to the elaborate structural and functional 
diflferentiation dependent upon reciprocal aid which dis- 
tinguishes civilised societies. That one group of indi- 
viduals can devote all their labour to the production of 
watch-springs is made possible, primarily, by the fact that 
other groups devote their respective labour to the pro- 
duction of some other component part of watches, and 
that still other groups devote their labour to combining the 
several parts into complete watches. Ultimately, however, 
the performance of this social function by the composite 
group of watchmakers depends upon the due performance of 
other social functions by other groups similarly or still more 
elaborately compounded. Food must be produced by 
some groups, clothing by others, furniture and buildings 
by still others ; books must be written and printed by the 
co-operation of several other groups ; multitudinous groups 
forming the transporting and exchanging system must 
perform their several functions, as well as many others 
too numerous to mention. These many groups are them- 
selves interdependent, the performance of the function of 
each of them being conditioned by the performance of 
their respective functions by all other groups. Moreover, 
this simultaneous co-operation of many groups is accom- 
panied by a successive co-operation. For each consumption- 
good is the ultimate result of the successive co-operation of 
groups, each devoting its efforts to the production of an 
intermediate good, as in order that bread may appear there 
are successively produced iron, agricultural machinery, 
wheat, milling machinery, flour, and baking appliances. 

This co-operation, consisting of the separation of efforts 
in time and space, is distinguished in other respects from 
the kind of co-operation which consists of the combination 



CHAP. II SOCIAL FUNCTIONS 281 

of efForts. The latter consciously and directly aims at the 
attainment of a common benefit, leaving individual benefits 
to result indirectly from the attainment of the conmion 
benefit. The former consciously and directly dms at the 
attainment of individual benefits, leaving the common 
benefit to result indirectly from the attainment of individual 
benefits. Every one of the innumerable millions who 
participate in this co-operation has no other object in view 
than the satisfaction of his own desires and those of his 
immediate dependents, the maintenance of his and their 
lives. Yet it is impossible for any of them to attdn this 
object without contributing to a corresponding extent to the 
satisfaction of others' desires and the maintenance of their 
lives. Each of them thus consciously aims at the attain- 
ment of an individual and proximate object, and in the 
measure of its attainment he unconsciously contributes to 
that of a social and ultimate object. 

Moreover, because the individual and not the common 
object is immediately aimed at, there is here an absence of 
the regulation and compulsion which were found to be 
essential conditions of the co-operation which aims directly 
at common objects. For the object of each co-operator 
being the satisfaction of his desires with the least exertion, 
his attainment of this object being dependent upon the 
extent to which his efForts enable others to satisfy their 
desires in like manner, it follows that the social object, the 
satisfaction of the desires of all with the least exertion, is 
attained automatically. 

Yet another difference must be pointed out. The 
co-operation which consists of the combination of efforts 
more or less fails to utilise the mental power of all but 
those who form the regulative agency. Obedience to 
orders required of the regulated precludes the use or full 
use of their mental power, and claims only the conjunction 
of their physical efforts towards the achievement of the 
common task. The reason may be found in the fact, 
that whUe the physical power of a group of men, 
intelligently directed, is equal to the sum of the physical 
powers of all of them, their mental powers cannot be so 
compounded. Ten men pulling at a rope can draw ten 



\ 



282 DEMOCRACY VERSUS SOCIAUSM part iv 

times as much as one man ; but ten men cannot reason 
ten times as well as one man. Their reasoning power, 
therefore, can only be utilised if each of them works at a 
separate task ; it must be neglected when they combine 
their efforts towards the accomplishment of a common 
task. The combination of the physical efforts of a group 
of men under the mental direction of one, therefore, 
necessarily involves the neglect of the intelligence of all 
but one man. As far as the object in view is concerned, 
the rest might be devoid of any greater intelligence than 
is required for the understanding of the commands of the 
one man. 

The unconscious co-operation which consists of the 
separation of efforts, however, utilises both the physical 
and mental powers of all the co-operators. Each chooses 
his own occupation, and within this occupation brings his 
mental as well as physical power to bear upon his in- 
dividual task. It is true that each sub-group exhibits to 
some extent the relation of regulator and regulated, of the 
captain and the privates of industry, and that the former 
alone determines the immediate objective of the common 
efforts of the sub-group. This regulation, however, is 
far different from that previously considered. For as the 
co-operation results from separation of efforts, each 
regulated co-operator has still to use his mental power in 
the accomplishment of his separate task, while the regulator 
uses his intelligence in the co-ordination of their several 
tasks. Moreover, no superior authority co-ordinates the 
labour of the several sub-groups which co-operate un- 
consciously towards the achievement of the ultimate social 
object. Hence, while conscious co-operation utilises only 
an insignificant part of the intelligence of the co-operators, 
unconscious co-operation utilises the whole sum of their 
individual intelligences. The latter, therefore, is a higher 
and more efficient form of co-operation, and its product 
must be superior to that of the former. It consists of the 
unconscious, voluntary, and reciprocal discharge of social 
functions by individuals and groups of individuals, all of 
whom, in the conscious pursuit of their individual ends, 
conjoin their mental and physical powers in unconsciously 



CHAP. II SOCIAL FUNCTIONS 283 

maintaining the life of the social organism with the least 
exertion on the part of all. 

The essential diiFerence between these two kinds of 
co-operation may be most fully perceived when the 
method of provisioning an army is contrasted with 
that of provisioning a great city. In the former case 
the head of the Commissariat Department decides upon 
the kinds, quantities, and qualities of the necessary supplies, 
as well as upon the delivery of stated quantities at given 
times and places. His orders are transmitted to a set 
of officials, each of whom takes control of the execution 
of a part of them by transmitting corresponding com- 
mands to other and carefully graded sets of officials. 
A closely graded and extensive regulating mechanism is 
thus consciously set in motion by one man, and more 
or less successfully accomplishes the purpose which he 
preconceived. 

The task of supplying a great city with all its in- 
numerable daily requirements is accomplished without 
such preconception, regulation, and direction. Whole- 
sale merchants, each dealing with a few kinds and qualities 
of goods, and with only a small part of the required 
quantity of these, without concert among themselves, 
each consciously intent, not on the ultimate object, the 
supply of the city, but only on the immediate object, the 
earning of his own living, set in motion the machinery 
which brings the daily supplies. From the stores thus 
collected retail merchants purchase their supplies ; each 
again being more or less ignorant of what his fellows are 
doing, and intent only on his own advantage through the 
satisfaction of some of the desires of his clients. Yet, 
though there is no conscious direction and no compulsory 
regulation, though the ultimate purpose which all these 
agencies subserve is not consciously before the mind of 
any one of them, the wants of a great city are satisfied 
with unfailing regiilarity, while the provisioning of an 
army is rarely a complete success, and frequently a more 
or less startling failure. 

Nevertheless, the latter task is far less complicated and 
difficult than the former. For an army is mainly com- 



284 DEMOCRACY VERSUS SOCIALISM partiv 

posed of males in the prime of life, and no attempt is 
made to supply more than is absolutely necessary to keep 
them in health and strength. The variety of goods with 
which the commissariat of an army deals is, therefore, 
exceedingly limited, while the quantity required of each 
is known, and the task to be performed is correspondingly 
simplified. 

The inhabitants of a large city comprise on the other 
hand individuals of ail ages, of both sexes, and of infinite 
variety of condition. The variety of goods to be supplied 
is, therefore, infinite in kind and quality, and the amoimt 
required of each kind and quality of goods varies almost 
from day to day. The task which unconscious co-opera- 
tion fulfils with unfailing regularity is, therefore, infinitely 
more complex than that which conscious co-operation 
rarely succeeds in fulfilling. 

Nor is the success of the one and the comparative 
failure of the other a mere accident which might be 
avoided by better organisation. For the more important 
and regularly recurring functions of all organisms are 
discharged unconsciously, while less important and 
irregularly recurring functions only are consciously dis- 
charged. Animal organisms direct consciously only such 
activities as their rate of motion and alimentation, while 
the more important activities, as respiration, circulation of 
the blood, digestion, and others, are discharged uncon- 
sciously. No amount of training could enable any man to 
efiiciently discharge such fimctions consciously ; the wisest 
and most careful of men could not escape premature death 
if he had to consciously direct these processes. 

Likewise, a social organism can efiiciently undertake 
the regulation of certain functions of minor importance 
or irregular occurrence. But the most important of all 
social hinctions, the satisfaction of the constantly recur- 
ring and innumerable wants of its component units, 
cannot be safely withdrawn from the department of 
unconscious activities and placed under the conscious 
direction of the social organism itself. For just as even 
a temporary interruption of the respiratory process or the 
circulation of the blood is fatal to the animal organism, so 



CHAP. II SOCIAL FUNCTIONS 285 

even a temporary interruption of the process by which a 
social organism is supplied with the means of satisfying its 
wants would be destructive of its life. Such interruption 
is difficult, nay, almost impossible, where the supplies 
originate in innumerable, self-directed, and independent 
groups ; it is comparatively easy when supplies originate 
in the mandate of a centralised agency. Apart, however, 
from this consideration, the co-operative process is so 
intricate and involved, so far surpasses the power of 
control of any individual or set of individuals, that it 
cannot be efficiently directed by them even under ordinary 
circumstances. 

Consider what is involved. A nation wants vegetable 
and animal food, clothing, furniture, houses, literature, 
artistic enjoyments and amusements, wants teaching, 
healing, and many mental stimuli. The wants comprised 
under each of these heads are of infinite variety and 
varying quantity, and are largely dependent for their 
satisfaction upon the uncertain response of nature to 
man's efforts. The central agency regulating the co- 
operative mechanism must nevertheless predetermine the 
kinds, qualities, and quantities of goods, and services 
which may be required at a given future time, and must 
so direct production that all of them may be supplied. 
Many processes of production involve the lapse of years 
between their initiation and completion. The directing 
agency must, therefore, be able to successfully estimate 
the requirements of distant years in order to determine 
the amount of labour which shall be devoted to the 
present initiation of their production. 

Besides this productive process, that of distribution has 
to be carried out. The kinds, qualities, and quantities of 
goods required at any point in the national territory have 
to be determined beforehand, their transport to such points 
must be accomplished, and they must there be distributed 
in such equitable manner as has been decided upon. 
Among other difficulties, insuperable in the absence of 
the competitive process, that of determining the value of 
every kind and quality of goods at a given time has to 
be overcome. 



286 DEMOCRACY VERSUS SOCIALISM part iv 

Nor is even this all. For the production and dis- 
tribution of all these requisites of infinite variety, millions 
of men and women similarly varying in character and 
aptitudes must each be allotted his or her appointed task, 
and must be superintended in, and if necessary compelled 
to, the performance of their respective functions. This 
selection, regulation, and compidsion must be exercised 
by the central agency through innumerable subordinate 
agencies, the component units of which are mostly unseen 
by and unknown to the central agency. Even if each unit 
entering into the composition of the regulated body and of 
the regulative machinery were actuated solely by the desire 
to efficiently perform his or her task, efficient regulation of 
the co-operation of all of them would transcend the power 
of any man or body of men. But when every unit is 
actuated by many and frequently conflicting motives, 
when many, if not most, are actuated by desires the 
satisfaction of which conflicts with the efficient perform- 
ance of the task allotted to them, as will and must be the 
case, efficient regulation from without is so obviously 
hopeless, that it is difficult to understand the frame of 
mind which can contemplate its possibility. 

As the task of consciously organising and performing 
the industrial functions of a society is beyond the power 
of any man or body of men, so it is equally impossible 
to consciously organise the performance of the scientific, 
artistic, and literary functions. Science has conquered 
so wide a field that no one mind can grasp a tithe of 
its volume. The individual scientist, restricted to the 
cultivation of a small part of the scientific area, can only 
do so to advantage if its selection is left to his individual 
predilection and predisposition. He may then advance 
human knowledge by contributing a mite, which, in due 
time, will swell the general stock. If, however, a regula- 
tive agency organises science, as under Socialism it must, 
individual aptitude cannot be considered. The future 
scientist must be selected at a comparatively early age, and 
must be ordered to fit himself for such branch or branches 
as, to the selectors, seem most in need of recruits. Should 
the regulative agency be of opinion that the number of 



CHAP. 11 SOCIAL FUNCTIONS 287 

investigators in one branch is excessive while in another it 
is deficient, some must be transferred. By accident some 
men may do the work for which they possess special 
aptitude ; as a rule they will be compelled to neglect the 
researches for which they are specially fitted and engage 
in others for which they are less fitted or unfitted. Stag- 
nation and retrogression, therefore, must take the place of 
the active progress in all branches of science which dis- 
tinguishes our period. For in science, and still more in 
art and literature, Hegel's dictum is supremely true : 
"Subjective volition, passion, it is that sets men in 
activity ; men will not interest themselves in anything 
unless their individuality is gratified by its attainment." 

Art and literature, though giving the most complete 
expression to national sentiments, are nevertheless still 
more dependent upon the fullest freedom of the individual 
to express himself or herself. To consciously select the 
youths who shall be trained as artists and writers, to 
afterwards prescribe to each of them the particular branch 
of art and literature which he or she shall cultivate, is a 
task which, even if it could be accomplished, would kill 
all art and literature. 

Moreover, while the task of consciously directing the 
performance of these social functions vastly transcends the 
power of the best and wisest of men, experience proves 
that those who would be entrusted with it would be 
neither the best nor the wisest of the men available. 
Democracies have produced men of great ability and 
of ' conspicuous honour to deal with great questions of 
State. But where democratic governments have under- 
taken the conduct of industrial functions, the task has 
generally fallen into unreliable and incompetent hands. 
Universal experience proves that the more detailed 
governmental functions become, the more they deal with 
industrial matters, the less lofty is the type of politician. 
Abuse of power, neglect of duty, favouritism and jobbery 
have been the almost universal accompaniment of in- 
dustrial politics. Yet the temptations in the way of the 
conductors of national industries are so great and numerous, 
the task is so complicated, that even greater and loftier 



288 DEMOCRACY VERSUS SOCIALISM partiv 

qualities are required by them than by those who conduct 
the wider affairs of the State. 

In the Australian colonies governments have for many 
years exercised industrial functions which cannot with 
safety or justice be left to the conduct of individuals 
without due compensation. Railways, telegraphs, tele- 
phones, the postal service, the supply of gas and water, as 
well as other functions, have been and are performed by 
governmental agencies. Yet there is universal discontent 
with the management of these comparatively simple in- 
dustrial undertakings, a discontent in the expression of 
which the journalistic and political advocates of the conduct 
of all industries by the State have been and are loudest. 

The foremost aim of Socialism is to substitute this 
conscious discharge of social functions for their unconscious 
discharge ; to supersede the world-wide voluntary and 
undirected industrial co-operation by a compulsory and 
regulated co-operation under the direction of the State. 
The foregoing exposition proves that the co-operation at 
which Socialism aims is inferior in type and less efficient 
than that which it desires to displace, and that the success 
of the endeavour would enormously reduce the oppor- 
tunities of happiness. Before contemplating in greater 
detail the social results which the establishment of the 
industrial system of Socialism must produce, it is necessary 
to examine the form which its organisation must assume. 



CHAPTER III 

THE INDUSTRIAL ORGANISATION OF THE SOCIALIST 

STATE 

Regulation from without is necessary to ensure the 
welfare and continuance of the social organism in the 
measure in which the self- regulation of the units com- 
posing it is defective. As self-regulation grows in extensity 
and intensity, regulation from without, becoming less 
necessary, may be correspondingly reduced ; were self- 
regulation complete and universal, all regulation from 
without might be abolished with absolute safety. More- 
over, unnecessary regulation from without, all that which 
is in excess of the amount necessitated by the deficiency of 
self-regulation, is not merely useless but socially harmful. 
The maintenance of regulative agencies in excess of those 
required for social weUbeing diminishes the maintenance 
available for socially beneficial agencies, and thus hinders 
their growth. Worse still, self-regulation being ethically 
preferable to regulation from without, marking a higher 
stage of social evolution, persistence of unnecessary regula- 
tion from without hinders the further growth of this higher 
social sentiment. Hence it is that, as we ascend from lower 
to higher types of human society, regulation from without, 
political, ecclesiastical, parental, and industrial, decreases in 
extent and coerciveness. From the sanguinary despotism 
of Dahomey, or the all-pervading pressure of the Roman 
administration, to the freedom enjoyed under the British 
and American constitutions ; from the ecclesiastical tyranny 
of an African witch-doctor, or a mediaeval bishop, to the 
comparatively small influence of ecclesiastical authority on 

u 



290 DEMOCRACY VERSUS SOCIALISM part iv 

the life of modern Europe ; from the parental absolutism 
of an early Roman or Teutonic housefather to the equit- 
able relations between parents and children among the 
Anglo-Saxon nations to-day ; from slavery and serfdom 
to the free contract by which modern workers in com- 
bination bargain for the conditions of their employment, 
the upward march of mankind has been long and weary. 
Distant as the goal of fullest freedom as yet is, the progress 
of the past contains the promise of its attainment. Every 
step in this upward progress is the sign of a preceding 
advance in the adjustment of man's nature to the conditions 
of social life ; every reduction of regulation from without 
— of compulsory regulation — has been made possible by 
the evolution of better regulation from within — self or 
voluntary regulation. 

Moreover, compulsory regulation does not tend to 
disappear because it has become excessive, useless, and 
injurious. The removal of excessive regulation, the attain- 
ment of greater freedom, is always difficult, and frequently 
entails great sacrifices on the part of the regulated. For 
the regulating agency, like any other group of men, is 
mainly actuated by self- regarding sentiments. Not the 
performance of useful functions, but the maintenance of 
its members, is its principal object. Therefore it uses all 
its power to defend any of its component parts, regardless 
of the question whether the functions performed by them 
are necessary and beneficial or needless and detrimental to 
the social organism. In every progressive community, 
therefore, regulation from without is in excess of what 
social wellbeing requires, and not more but less com- 
pulsory regulation is a necessity of further progress. 

Here also Socialism disregards the teaching of universal 
history — runs counter to the course which the evolution 
of human society has taken. Instead of aiming at less 
regulation, it aims at more regulation ; instead of reducing 
the coerciveness of regulation from without, it must increase 
it. For the supersession of the unconscious and voluntary 
co-operation of to-day by a system of compulsory co- 
operation consciously directed by State agencies, involves 
universal regulation of the most minute and despotic kind. 



CHAP. Ill THE SOCIALIST STATE 291 

Not without reason do socialists speak of " an industrial 
army " as the type of organisation at which they aim. In 
structure and in the sentiment animating it the industrial 
organisation of Socialism must form a complete parallel to 
the organisation of an army. There must be the same 
graduated regimentation to convey orders and superintend 
their execution, and there must be the same subordination 
to secure the working of the machine. Unquestioning 
obedience, being as necessary in the industrial army of the 
socialist State as in the militant army, must, as in the latter, 
be enforced with unyielding rigour. 

Socialist writers and speakers, as a rule, are reluctant 
to set forth their idea of the form which the organisation 
of labour must take in the socialist State. They plead in 
excuse of this reluctance that it is impossible to foresee the 
exact character of an organisation which must change with 
the changing conditions of industry. True as this plea is 
with regard to the details of organisation, it is not true as 
regards its type. Just as change in weapons, and other 
conditions of warfare, while constantly altering the details 
of military organisation, has left its type unaltered, so 
changes in industrial conditions do not materially affect 
the type of industrial organisation. For the type is deter- 
mined solely by the object immediately aimed at, i.e. 
whether general or individual benefit is the proximate 
object. If, as is the case with Socialism, the general benefit 
is consciously aimed at, industrial activities must be regu- 
lated, as Socialism proposes to regulate them, by a central 
agency — national for industries of national importance, 
municipal for industries of merely municipal importance. 
The number of the individuals and the extent of the 
operations to be regulated then also impose a graduated 
series of regulating agencies, culminating in the central 
agency. Whether the subordinate regulative agencies 
derive their authority from the central agency, or whether 
their authority is derived from the same source as that of 
the central agency — say popular election — or whether each 
superior agency derives its authority from the agency im- 
mediately below it by delegated election, will profoundly 
affect the efficiency and strength of the whole organisation. 



292 DEMOCRACY VERSUS SOCIALISM part iv 

But as in every army, under all conditions of warfare, there 
must be a central commanding agency which transmits its 
orders through subordinate commanding agencies, and as 
the efficiency of an army depends upon the blind obedience 
of each subordinate agency, and of the soldiers which it 
commands, to the dictates of the central agency, so must 
the same regimentation and subordination prevail in the 
industrial army of the socialist state, whatever the changing 
conditions of industry may be. 

The few socialist writers who have dared to picture 
the industrial organisation which Socialism necessitates, 
much as they differ in detail, agree in admitting this con- 
tention. Laurence Gronlund describes it as follows : ^ — 

" Appointments will be made from below. . . . Under 
Socialism . . . the letter-carriers will elect their immediate 
superiors ; these, we will say, the postmasters ; and these, 
in their turn, the postmaster-general. . . . The workers 
in a factory should elect their foreman ; teachers their 
superintendent, etc. This is the only method by which 
harmonious, loyal co-operation of subordinates with supe- 
riors can be secured. No one ought to be a superior who 
has not the goodwill of those he has to direct. Under- 
stand also that appointment from below does not necessarily 
imply removal from below. . . . 

"Every directing officer should be responsible not 
alone for the work he himself does, but also for the work 
of his subordinates. He must see to it that they do their 
work well. Is not this a sufficiently good reason why 
every directing official should be given the right instantly 
to dismiss any one of his subordinates for cause assigned, 
inefficiency being, as already stated, the very best of causes? 
When, then, a foreman was inefficient, he would be removed 
instantly without trial by his superintendent ; he, again, 
might be removed by his bureau-chief, perhaps for abuse 
of power in removing the foreman ; this bureau-chief, 
again, by his department- chief. . . . Suppose we make 
every department-chief (head of a whole industry) liable 
to removal by the whole body of his subordinates . . . 
and that he be removed from office the moment that the 

^ The Qhoperative Commomotalthy pp. 166-176. (The italics are Gronltind'i.) 



CHAP. Ill THE SOCIALIST STATE 293 

collective judgment of the whole department is known, if 
that judgment is adverse to him. Then the bureau-chiefs 
immediately elect another chief of department, who can be 
removed in like manner if he should not suit the workers. 

" Can the foreman also dismiss any of his workers for 
inefficiency or other cause? . . . For such cases a trial 
by his comrades might be provided, the issue of which 
might be removal to a lower grade or some sort of com- 
pulsion. 

" Instead of any term of office long or short we shall 
have a tenure during good behaviour y 

The same author states : ^ " Do not, however, sup- 
pose that there will be no subordination under the new 
order of things. Subordination is an absolute essential of 
co-operation ; indeed, co-operation is discipline." 

Sir Henry Wrixon also furnishes valuable testimony 
in this direction. He states : * — 

"One of the ablest thinkers and advocates of the 
socialist cause in England favoured me by giving me more 
than one interview, at which he explained his opinions very 
clearly. He said : * ... In the social State there must 
be strict discipline ; the ranks of workmen would not be 
allowed to elect their own heads ; they would only have 
their vote for the general election of representatives. 
The idle would be subjected to some form of penal 
discipline.' " 

The same author makes the following statement : ® — 

" Mr. Sidney Webb, in a lecture, declared : * To 
suppose that the industrial affairs of a complicated in- 
dustrial State can be run without strict subordination and 
discipline, without obedience to orders, and without definite 
allowance for maintenance, is to dream, not of Socialism, 
but of anarchism.' " 

Equally decisive is the utterance of one of the fore- 
most leaders of the social democracy of Germany, August 
Bebel : *— 

" After society has entered into exclusive possession of 
all the means of production, the equal duty of all to labour, 

^ The Cooperative Commcmvealtk, p. 148. ' Socialism^ p. 129. 

* Uid, p. 21. * fFomariy p. 18 1. (William Reeves, London.) 



294 DEMOCRACY VERSUS SOCIALISM part iv 

without distinction of sex, will become the first funda- 
mental law of the socialistic community. . . . Socialists 
maintain that he who will not work has no right to eat. 
But by work they do not understand mere activity, but 
useful, i.e. productive work. The new society demands 
that each of its members shall execute a certain amount of 
work in manufacturing, in a handicraft, or in agriculture, 
by which he contributes a given quantity of products for 
the satisfaction of existing needs." 

These authorities agree in declaring that necessity 
of regimentation, subordination, and compulsion in the 
socialist organisation of labour, which we deduced from 
general principles. The ordinary worker, the vast mass 
of the male and female population, would, therefore, be 
exposed to conditions, uniform for all of them, and widely 
differing from those of the average artisan even under 
existing unjust social arrangements. For though the in- 
dividual artisan does not enjoy any great independence, he 
possesses in his union the means of bargaining for the con- 
ditions under which he will work, and even in matters too 
small for combined action, he can escape irksome condi- 
tions, such as the chicanery of a foreman or employer, by 
changing from one factory to another. Large sections 
of the people — farmers, shopkeepers, professional men, 
merchants, hawkers, and others, as well as most women — 
carry on their labour without the supervision of any one, 
and without the slightest industrial subordination. More- 
over, within certain limits, every man is free to choose his 
occupation, and the place of his abode, and all are free 
from any outside compulsion with regard to the amoxmt 
of labour which they desire to perform. 

Under Socialism all this would be changed. The 
determination by the central regulating agency of the 
kinds, qualities, and quantities of commodities to be pro- 
duced, involves of necessity the further determination of 
the number of workers to be employed in each occupation, 
and of the place where their labour may be most usefully 
exercised. When the number of labourers required in 
any occupation and place has been obtained, others must 
enter such occupations and in such localities as the 



CHAP. Ill THE SOCIALIST STATE 295 

administration may decide. If, through any change in 
demand, or in methods of production, the number of 
workers in any occupation becomes excessive, the surplus, 
which must be selected from the total number by officials, 
must enter such other occupations and leave for such 
other localities as the administration may decide. Further- 
more, no youth can be allowed the choice of his occu- 
pation, as otherwise some occupations would become 
overcrowded, while others, equally necessary, would be 
neglected. The administration, therefore, must decide 
the occupation of every youth, male and female. Free- 
dom of movement, the right of any one to choose his or 
her place of abode and labour, as well as freedom of choice 
with regard to the occupation which any one desires to 
follow, would be absolutely abolished. Socialists, while 
appearing to contest this conclusion, nevertheless fully 
admit it. Thus August Bebel states : ^ — 

"Every one decides for himself in which branch he 
desires to be employed ; the large number of various 
kinds of work will permit the gratification of the most 
various wishes. If a superfluity of workmen occur in one 
branch, and a deficiency in another, it will be the duty of 
the executive to arrange matters and readjust the in- 
equality." 

The second sentence in the foregoing quotation 
obviously contradicts the first, for if the executive is to 
" readjust the inequality " arising from " a superfluity of 
workmen in one branch and a deficiency in another," the 
executive must have power to compel the superfluous 
labourers to change their occupation, and if the deficiency 
has arisen in another locality, to compel them to work in 
this other locality. The second sentence, therefore, fully 
admits the conclusion we have drawn. Gronlund in like 
manner is forced to admit this contention, while endeavour- 
ing to deny it. He states : ^ — 

" It is, as we have stated, for the Commonwealth to 
determine, in its character of statistician, how much of a 
given product shall be produced the coming year or 

^ August Bebel, ff^otiuui, p. 183. 
' TAe Co'Optrative CommonweaitA, pp. 148, 149. (The italics are Gronlund*i.) 



296 DEMOCRACY VERSUS SOCIAUSM part i v 

season. . . . Suppose in a given industry production will 
have to be narrowed down to one-half the usual quantum. 
It follows that, in such case, the workmen can only work 
half the usual time, and that there will only be one-half 
the usual proceeds to be distributed among them. 

*'What must be the result.? Evidently the men's 
remuneration will have to be reduced one-half, or a 
corresponding number of workers will have to pass over 
to some other employment — for the consequences of such 
disorder which may be permanent, and is not the result 
of either miscalculation or misfortune, will certainly not 
be borne by society at large ; and the Commonwealth, 
while it guarantees suitable employment, can certainly not 
guarantee a particular employment to anybody. 

"A change of employment will, however, in that 
Commonwealth be tolerably easy for the worker, on 
account of the high grade of general education, and 
because all will have passed through a thorough apprentice- 
ship in general mechanics. 

"Certain critics of Socialism object that no person 
under it will have any effective choice in regard to 
employment. The above shows how little foundation 
there is for such criticism. But we should like to know 
how much * effective choice ' the vast majority of men now 
have in regard to employment, or wages, or place of abode, 
or anything else." [^ 

Whether a change of employment, at the dictate of 
some spiteful official, or as a disguised punishment for 
opposition to the regulative agency, from, say the manu- 
facture of optical instruments to the work of a navvy ; 
from leader -writing on a governmental newspaper to 
breaking stones ; or, for a woman, from teaching literature 
to working at a power-loom or a spinning-mule, is " toler- 
ably easy," as Gronlund asserts, appears to be questionable. 
There can, however, be no doubt that if the State, having 
abolished all competing employment, does not guarantee 
the " particular " employment any one desires, but merely 
"suitable" employment, i.e. suitable in the opinion of 
some official or officials ; and if workers will have to 
change the character and place of their occupation when- 



CHAP. Ill THE SOCIALIST STATE 297 

ever the administration deem it necessary, free choice of 
occupation and abode is abolished. 

This subjection to the will of the executive agency, 
depriving the individual of the right to choose the place 
of his labour, deprives him also of all power to escape 
from specially onerous conditions of employment. For as 
he must go from one factory to another if a superior 
officer so decides, so he must remain in a given factory 
unless he receives permission to transfer himself. He, 
therefore, is unable to escape from the chicanery of local 
officials, from the annoyances, injuries, and punishments 
which may become his lot, should he have roused the ill- 
will of any of his local superiors or of the administration 
as a whole. 

Moreover, equality of reward has as its necessary 
corollary equality of service by both men and women, as 
Bebel admits.^ But how is this equality of service to be 
enforced? Apart from the difficulty of arriving at an 
equation of effort in different occupations, how are all 
men and women to be induced to do the amount of work 
decided upon ? If the standard is fixed at a level suitable 
to weak women, it will enormously reduce the productivity 
of men's labour. If it is fixed so low as to suit the slowest 
or laziest of workers, the productivity of the labour of all 
superior workers will be reduced. If it is fixed higher 
than this — ^as it inevitably must be — say so as to suit the 
men of average industry, ability, and strength, most 
women and many men will be unable to comply with it, 
while others will be unwilling to do so. Are they all to 
be compelled to work up to the standard of efficiency, 
regardless of the question whether their failure results 
from inability or laziness ? 

Socialists generally avoid the discussion of these diffi- 
culties, or escape from it by the unreasoning assertion that 
there will be no weak or lazy members of the socialist 
State. Thus Bebel writes : ^ — 

'* And what becomes of the difference between the in- 
dustrious and the idle, the intelligent and the stupid ? 
There will be no such differences, because that which we 

^ See quotation, pp. 293, 294. ' ff^omarij pp. 194, 195. 



I 



298 DEMOCRACY VERSUS SOCIALISM partiv 

associate with these conceptions will have ceased to exist. 
. . . As all will carry on labour under conditions of per- 
fect equality, and each will be occupied with the kind of 
work for which his tastes and faculties best qualify him, it 
is evident that the differences in the quality of the work 
done will be extremely small." 

Even if it were the case, which it is not, that " each 
will be occupied with the kind of work for which his 
tastes and faculties best qualify him " or her, it would not 
follow that the difference in the quality and amount of 
work done would be " extremely small." For the differ- 
ence in faculties, mental and physical, must result in 
corresponding difference in the work done, and as the 
former differences are great, so must the latter be. More- 
over, those who have framed any conception of the slow 
adaptation of individuals to the conditions of social life ; 
those who see that even where all the advantages to be 
reaped from conscientious work go to its performer, large 
numbers fail to work conscientiously ; those who have 
witnessed the shirking of work by members of co-operative 
industrial undertakings and the consequent collapse of the 
latter, — all these will hesitate to adopt the conclusion that 
Socialism, i.e. working, not for their individual advantage, 
but for that of the community, can produce such a sudden 
transformation of character as to make all men and women 
conscientious, industrious, and able. 

Bebel himself states : ^ " He who will not work has no 
right to eat," and it follows that he who works less than 
his fellows has less right to eat, i.e. must receive less, or 
must be compelled to work as much. The existing 
organisation of industry, with all its faults, at least pro- 
duces some measure of equality between service and 
reward. The worker who is unable or incorrigibly lazy 
is discharged, and the less able or less industrious workers 
receive lower pay than their more able or industrious 
fellows. This indirect coercion is not available in the 
socialist State. Monopoly of employment by the State 
and equality of reward render either discharge or reduced 
pay impossible. Penal regulations, culminating inevitably 

^ See quotation, p. 294. 



CHAP. Ill THE SOCIALIST STATE 299 

in personal chastisement, are the only means by which the 
socialist State can enforce its labour regulations. The 
prison and the knout, therefore, threaten all who, 
regarded as capable of work by their official superiors, 
are nevertheless unable or unwilling to perform the task 
allotted to all alike. 

The great mass of the population, all those who do 
not form part of the regulating hierarchy, will be subjected 
by Socialism to such regimentation, discipline, and com- 
pulsion as prevails in militant organisations. The slow 
and painful evolution which in the course of centuries has 
rescued the masses of the people from such a state of sub- 
jection ; which has created the comparative freedom for 
which past generations have gladly ventured life and 
fortune ; which, superseding authority by individual re- 
sponsibility, has jrielded the opportunity for the moral 
elevation of man, would thus be turned upon itself. Man 
would again become part of a social mechanism which, 
disregarding individual desires and aspirations, would sup- 
press all individuality, personal initiative, and aspiration. 

Not the misuse of the powers conferred upon the 
regulative agency, but the conscientious exercise of such 
power for social wellbeing, must inevitably lead to this 
result. Whether such misuse will take place, and to what 
extent, must, however, largely depend upon the control 
which the regulated masses can exercise over the regulative 
agency. The following chapter will, among others, deal 
with this question. 



CHAPTER IV 

THE POLITICAL OUTCOME OF SOCIALISM 

A GREAT landowner, attached to the sport of his youth, 
brings to Australia a few pairs of rabbits, and within a few 
years the plague of rabbits has half-ruined the landowners 
of the country, while enforcing great expenditure to avert 
total ruin. A settler, fond of water-cress, introduces the 
plant in New Zealand, and before a generation has passed, 
it has spread to an extent which threatens to choke water- 
courses and rivers. A governor's wife, fond of Lantana 
blossoms, brings a plant to Ceylon, where it spreads over 
large areas of fertile land, making them useless for culti- 
vation. 

These examples of man's want of foresight and inability 
to control the natural forces which he sets in motion might 
be multiplied almost indefinitely. Still more numerous are 
the examples of his inability to control the social forces 
which he sets in motion, and his want of foresight regard- 
ing their tendencies. Laws which approximately achieve 
the objects for which they were passed achieve additional 
results not aimed at ; and, with like frequency, laws fail 
to achieve the object contemplated, while achieving other 
and unexpected results. 

Equally true it is, that governmental structures once 
created have a tendency to escape control and to achieve 
unexpected results. Like all other groups of men, those 
forming governmental agencies judge of the general well- 
being through their own, and desire to extend the func- 
tions and power of the agency to which they belong. The 
separation of their functions from those of the rest of the 



CH. IV POLITICAL OUTCOME OF SOCIALISM 301 

population produces a spirit of caste, and makes them 
impatient of any control except that exercised by members 
of their caste, while their separate interests are placed 
before the general interest. At the same time, the gradu- 
ated organisation and centralised authority of such agencies 
enable them to persistently pursue their separate interests, 
and to overcome the sporadic resistance of the unorganised 
regulated masses divided by apparently conflicting interests. 
The tendency of all such agencies to thus enlarge their 
functions and escape from popular control, to convert 
derivative authority into absolute authority, is universally 
visible. It is shown no less in the rise of more or less 
formally elective chiefs into hereditary and absolute kings, 
or in that of humble deacons and presbyters into princes 
of the church and popes, than in the power of party 
machinery in the United States. For though the people 
of the United States enjoy all the forms of control over 
their several governments ; though popular election is stiU 
the method of appointment to aD legislative and many of 
the important administrative positions, it is nevertheless a 
notorious fact that all real control by the people has been 
lost. It has passed into the hands of an organisation 
created for the purpose of causing popular control to be 
exercised with efficiency — the party machine. The party 
machinery, directed by an irresponsible and generally corrupt 
person, the " boss," nominates the candidates for office in 
towns, states, and union ; to the electors remains but the 
inglorious and frequently distasteful task of ratifying the 
nominations of one machine or the other. The organisa- 
tion created for one end has achieved another and con- 
trary end ; the servants of the people have become the 
masters of the people. 

The same tendency has made its appearance in the 
great organisation of the Co-operative Stores, which 
culminates respectively in the English and Scottish Co- 
operative Wholesale Societies : — 

" The Co-operative Stores of each district hold meet- 
ings periodically to decide questions of business and policy. 
In these district meetings the Wholesale Directors are 
represented by two of their own number ; and with their 



302 DEMOCRACY VERSUS SOCIALISM part iv 

wider experience and central prestige they find it an easy 
matter usually to control the local delegates. Nominally, 
the Wholesale is under the control of the delegates chosen 
by the societies which hold shares in it, and for whose 
convenience it was constituted ; but, practically, I was 
assured by its critics, popular control is gradually becom- 
ing a mere name. The Central Government has become 
so large that its own public cannot deal with it." ^ 

More instructive still are the difficulties which trade 
unions experience in their endeavour to limit and control 
the growing power of their elected officials. The testi- 
mony of Mr. and Mrs. Sidney Webb is of peculiar value 
on this point, not only on account of their exhaustive 
study of trade unions, but also because they may be 
regarded as unwilling witnesses to the despotism which 
Socialism must engender. Dealing with the evolution of 
trade -union organisation, they make the following state- 
ments : 2 — 

" It was assumed that everything should be submitted 
to * the voices ' of the whole body, and that each member 
should take an equal and identical share in the com- 
mon project. As the union developed from an angry 
crowd, unanimously demanding the redress of a particular 
grievance, into an insurance company of national extent, 
obliged to follow some definite trade policy, the need for 
administrative efficiency more and more forced itself on 
the minds of the members. This efficiency involved an 
ever- increasing specialisation of function. The growing 
mass of business and the difficulty and complication of the 
questions dealt with involved the growth of an official 
class, marked off by capacity, training, and habit of life 
from the rank and file. Failure to specialise the executive 
function quickly brought extinction. On the other hand, 
this very specialisation undermined the popular control, 
and thus risked the loss of the indispensable popular 
assent. The early expedients of rotation of office, the 
mass meeting, and the referendum proved, in practice, 
utterly inadequate as a means of recovering genuine 

* Henry D. Lloyd, Labour Co-Partmrship^ pp. 274, 275. 
' Industrial Democracy^ pp. 59, 60, and 70. 



CH. IV POUTICAL OUTCOME OF SOCIALISM 303 

popular control. At each particular crisis the indi- 
vidual member found himself overmatched by the official 
machinery which he had created. At this stage irre- 
sponsible bureaucracy seemed the inevitable outcome. 
But democracy formed yet another expedient, which in 
some favoured unions has gone far to solve the problem. 
The specialisation of the executive into a permanent, 
expert civil service was balanced by the specialisation of 
the legislature, in the establishment of a supreme repre- 
sentative assembly, itself undertaking the work of direction 
and control for which the members at large had proved 
incompetent. We have seen how difficult it is for a com- 
munity of manual workers to obtain such an assembly, 
and how large a part is inevitably played in it by the 
ever-growing number of salaried officers. But in the 
representative assembly these salaried officers sit in a 
new capacity. The work expected from them by their 
employers is not that of execution, but of criticism and 
direction. To balance the professional civil servant we 
have, in fact, the professional representative. . . . 

*' How far such a development will . . . promote 
collective action, and tend to increasing bureaucracy ; 
how far, on the other hand, it will increase the real 
authority of the people over the representative assembly, 
and of the representative assembly over the permanent 
civil service ; how far, in fine, it will give us that com- 
bination of administrative efficiency and popular control 
which is at once the requisite and ideal of all democracy, — 
all these are questions which make the future interesting." 

The preceding extracts show that Mr. and Mrs. Webb 
are by no means certain that the measure which, they state, 
has to some extent curbed the excessive and still-growing 
power of the elective officials in some " favoured " trade 
unions, will be equally effective in curbing the power of 
the bureaucracy which Socialism will create. The follow- 
ing considerations, showing that the doubt is more than 
justified, censure the levity which regards as merely 
'' interesting " a future replete with dangers : — 

A trade union is a voluntary organisation which 
men can join and leave without serious sacrifice. If a 



304 DEMOCRACY VERSUS SOCIAUSM part iv 

minority is dissatisfied with the conduct of the union's 
affairs, they may leave in a body and create another union. 
If, on the other hand, the malcontents form a majority of 
the members, they can dismiss all existing officials and 
elect new ones. Autocratic conduct on the part of 
officials may all the more readily provoke this result on 
account of the paucity of officials compared with the number 
of members ; of the absence of any close and graduated 
organisation comprising the officials of all unions ; of the 
paucity of the officials' relatives and interested friends 
among the members of the union ; of the absence of 
official patronage and consequent inability to bribe or 
terrorise numerous members. 

The regulative agency which Socialism must create and 
the relation between it and the regulated members of the 
State contrast in all these respects with the regulative 
agency of a trade union and its relation to the body of 
members. A dissatisfied minority cannot possibly set up 
a new state for itself, nor can it in any other way escape 
the compulsion, and even aggression, of the regulative 
organisation. Even the dissatisfaction of a majority 
might, and probably would, be unable to curb its power. 
For this regulative agency, exceedingly numerous, would 
also be highly regulated and organised, and its full power 
would be wielded from one centre. The influence and 
power, even of existing bureaucracies, comparatively small 
in number and restricted in functions, are only too visible 
in such countries as France and Germany. The far greater 
number and all-embracing functions of the socialist bureau- 
cracy, therefore, must result in its yielding a vastly greater 
power. 

Nor is this all. A regulative agency grows at the 
expense of the regulated. Every unit added to the former 
is taken from the latter, and, adding to the aggressive 
power of the regulators, weakens the resisting power of 
the regulated. The transfer of power is, however, much 
greater than the number of the transferred imits would 
indicate. For not only is the transfer from an un- 
organised body to an organised, but there are included 
in the transfer the relatives and friends of the new officials 



CH. IV POLITICAL OUTCOME OF SOCIALISM 305 

whose sympathy and support still further strengthen the 
official organisation. 

Further still, this exceedingly numerous official class, 
closely organised and centrally commanded, supported' by 
still larger numbers of interested adherents among the 
regulated, has absolute control over the population, the 
land, the means of production, and of all available con- 
sumption-goods. Wielding, on the one hand, an un- 
exampled power of bribery, it, on the other, wields an 
equally unexampled power of terrorism. Where grati- 
tude for favours, past and to come, fails to silence the 
expression of discontent, fear of vengeance might well 
produce this result. For, as already pointed out, control 
of production involves control of the producers. The 
administration must have the power to shift workers from 
one locality and occupation to other localities and occupa- 
tions. What easier than to separate husband and wife, 
parents and daughters, under the plea of industrial neces- 
sity ? How will the malcontent resist, who is transferred 
from an agreeable locality and occupation to a disagree- 
able locality and exhausting occupation, when the ad- 
ministration alone can judge of the necessity of such 
transfer ? 

Nor does even this exhaust the oppressive powers of 
the socialist bureaucracy. Journalism and the production 
of periodical literature generally, like every other occupa- 
tion, must be carried on under its control. It is alleged 
that a body of discontented individuals might join to 
produce a journal expressing their opinions. No such 
action, however, can be permitted, if the fundamental 
principles of Socialism are to be maintained. For the 
establishment of such a journal would be a return to the 
" profit-mongering " system which Socialism is to displace. 
The subscribers, owning the paper, would be in the posi- 
tion of shareholders, and would receive the profit from the 
venture, if any. If not they, but some one else owned the 
paper, this owner would be the profit receiver. If this is 
permissible with regard to a newspaper, why not in the 
case of factories also ? Apart, however, from this con- 
sideration, no journal hostile to the bureaucracy could 



3o6 DEMOCRACY VERSUS SOCIALISM part iv 

possibly maintain itself. Its machinery, paper, ink, type, 
and all other requisites could not otherwise be obtained 
than from State magazines. If the hostile paper were not 
speedily extinguished through the constantly recurring 
difficulties and delays in obtaining supplies which the 
bureaucracy could create at will, other and more drastic 
measures might easily scatter its producers and subscribers, 
and thus end its existence. Thus the whole of the daily 
and other periodical press would be under the absolute 
control of the bureaucracy ; press criticism of its doings 
would be impossible ; its misdeeds would be concealed 
from all but those directly affected, while all news and 
reflections would be " edited " to suit its purposes. 

If it is suggested that, in the absence of an independent 
press, combined public action can be promoted by means 
of correspondence and secret personal agitation, it is over- 
looked that the all - pervading power of the socialist 
bureaucracy would again block the way. A powerful and 
numerous bureaucracy, having representatives on every 
farm and in every mine, factory, and workshop, would 
inevitably know every disaffected individual, nor would it 
hesitate to open and read their correspondence passing 
through the post-office. The knowledge thus obtained 
would speedily lead to the suppression of their correspond- 
ence and to the administrative harassing of the writers 
and addressees. On the other hand, the impossibility of 
leaving the place of occupation without official permission 
would prevent personal agitation elsewhere, while such 
local agitation as might be attempted would be speedily 
interrupted by shifting the principal agitators to distant 
localities. 

If, then, as we witness to-day in continental countries, 
a comparatively small body of officials having a restricted 
sphere of influence and only partial control over the press, 
wielding also but small power of bribing or injuring 
private individuals, possess nevertheless a formidable 
power over the public whose servants they profess to be, 
it is obvious that the far more numerous and coherent 
socialist bureaucracy, actuated by common interests and 
acting under one central authority, exercising unlimited 



CH. IV POLITICAL OUTCOME OF SOCIALISM 307 

powers of interference, of bribery and of intimidation, 
controlling absolutely the whole newspaper press and what- 
ever armed force there may be, would wield a power 
absolutely irresistible to an incoherent and widely scattered 
public, having no settled policy, no habits of united action, 
and no means of communicating with each other. 

To check and control such overwhelming power by 
means of an elective assembly is an idle dream. As Mr. 
and Mrs. Sidney Webb themselves point out, even in the 
elective assemblies of trade unions which have been formed 
to control their elected officials, " a large part is inevitably 
played by the ever-growing number of salaried officers." 
How can any one, aware of this fact, hope to prevent the 
legislature of the socialist State being composed mainly of 
officials or of unofficial nominees of the bureaucracy selected 
for their devotion to the cause of the latter.? As the 
power of the socialist bureaucracy would exceed that of 
any existing bureaucracy, so must its influence with the 
electors exceed that of the latter. How great that power 
is, is shown no less by every election in Germany and 
France than by Napoleonic plebiscites. An elective 
assembly composed as that of the socialist State must be, 
far from being a check on the power of the bureaucracy, 
and the abuse of that power, would be the keystone in the 
arch of bureaucratic absolutism. 

If it is replied that France and Germany are not truly 
democratic countries, the rejoinder is that a like state of 
affairs prevails in the most democratic countries. It is 
well known that the influence of the machine in American 
politics is largely based on its co-operation with office- 
holders and expectant office-holders. A still better object- 
lesson is furnished by the Australian Colonies and 
appeared most clearly during the general elections of 
1894 in Victoria. A ministry, determined to reduce the 
annual deficit by curtailing the number and salaries of a 
somewhat excessive but by no means overpaid civil service, 
appealed to the country. For the first time in the history 
of the colony the public service, otherwise divided in 
politics, unitedly and actively supported the opposition. 
The result was a disastrous defeat of the ministerial party. 



3o8 DEMOCRACY VERSUS SOCIALISM part iv 

attributed by a general consensus of opinion to the active 
opposition of the public service. 

What is possible to a numerically small and compara- 
tively uninfluential public service in a British colony would 
be the merest child's play to a socialist bureaucracy. The 
elective assembly would merely be a counterpart of the 
bureaucracy in which the people who nominally elected it 
would have no influence, just as election of the oflicials by 
the people would fail to ensure their control over the 
bureaucracy, as Mr. and Mrs. Webb admit. 

Similar objections apply to another method, also 
suggested by Mr. and Mrs. Webb : ^ — 

" As miner, mechanic, or mill operative, the worker is 
and must be the servant of the community. From that 
service Socialism oflfers no escape. All it can promise is to 
make the worker, in his capacity of citizen, the joint pro- 
prietor of the nation's industry and the elector of the 
head oflicers who administer it." 

There are two methods of electing head officers ; one 
is that the persons employed in each industrial department 
elect the head officer of their industry, or that the whole 
people elect the head officers of all industrial departments. 
In either case a constituency spread over the whole country 
would have to elect one or more candidates. In order that 
a candidate may be elected he must be known to possess 
the requisite qualifications, i.e, capacity and experience to 
manage, not merely one factory, but all the industrial 
establishments comprised in one department, say the textile 
industries. 

Such men are rare always, and under no circumstances 
can they be found among the number of ordinary work- 
men under Socialism. There may be some among them 
who possess sufficient natural ability, but having occupied 
no administrative post, they cannot possess, and still less 
can they be known to possess, the requisite experience. 
Such experience cannot be found outside the ranks of the 
socialist bureaucracy. Some officials, having reached high 
rank by long service, alone can be selected. The ideas 
and interests of such men would be congruous with those 

* S. and B. Webb, Problemt of Modern Industry ^ p. 275. 



CH. IV POUTICAL OUTCOME OF SOCIALISM 309 

of their fellow-bureaucrats, and a reform of the bureau- 
cracy, therefore, cannot be expected from them. The 
people may change their despots, but they cannot escape 
despotism. 

Suppose, however, the people, made reckless by 
oppression, determined to risk all consequences and to 
elect some ordinary workers in spite of their inexperience ; 
candidates willing to brave the vengeance and honest 
enough to withstand the bribery of the bureaucracy will be 
difficult to find. But how are they to be found and their 
trustworthiness made known throughout the vast con- 
stituency ? Known within one factory, their names are 
utterly meaningless anywhere else, and cannot be dis- 
tinguished from those of the creatures of the bureau- 
cracy whom the latter would put forward. For, as the 
press is in the hands of the bureaucracy, as it can control 
correspondence and all other means of communication, the 
ordinary workers, as already pointed out, have no means 
of organising combined action. 

Not only, therefore, would the election of head oflicers 
by the workers be a farce, but it would materially 
strengthen the hands of the bureaucracy in making itself 
absolute. The board of head officers, being elected by the 
people, would derive its power from the same authority as 
the legislature. Individually their power would have a 
superior foundation to that of the legislators, as being 
derived from a largely superior number of electors. Even 
in the unlikely case of their confederates not controlling 
the legislature, they would thus be in a better position to 
fight and conquer the latter than if their authority were 
derived from an inferior source than that of the latter. 

Is there then no possibility of controlling the power of 
the socialist bureaucracy in other ways ? An examination 
of the several ways other than election for appointing 
officials will show that there is no such possibility. The 
first of these is the modification of elective appointment 
by dismissal through superiors, suggested by Laurence 
Gronlund.^ This modification must obviously destroy 
the last vestige of control which the electors might retain. 

^ See quotation, p. Z92. 



3IO DEMOCRACY VERSUS SOCIALISM partiv 

For, once appointed, the official would have to fear 
nothing from his electors and everything from his 
superiors, at whose mercy he would be placed. Abject 
servility towards superiors, combined with insolent dis- 
regard of the wishes and interests of the regulated masses, 
would be the result. At the same time, the election of the 
heads of departments, who would form the chief and 
central authority, by their immediate subordinates, would 
ensure the composition of this supreme authority by men 
pledged to uphold the interests of the bureaucracy under 
all circumstances. This proposal, therefore, offers no 
escape from the dilemma in which Socialism finds itself. 

An alternative method may be found in admission to 
the service by competitive examinations, advancement by 
seniority or by recommendation from superiors, dismissal 
at the recommendation of a judicial board after trial, and 
appointment of a central agency by the legislative assembly. 
This method, however, is obviously unable to destroy 
the homogeneity and power of the administration, nor 
would it offer any guarantee against the misuse of that 
power as long as the bureaucracy can influence popular 
elections and the appointment of the judicial board. 

The only other method is suggested in the Fabian 
Essays} It is there stated : — 

" I do not think that the direct election of the 
manager and foremen by the employees will be found to 
work well in practice or to be consistent with the discipline 
necessary in carrying on a large business undertaking. 
It seems to me better that the Commune should elect its 
council — thus keeping under its control the general 
authority — but should empower the council to elect the 
officials, so that the power of selection and dismissal within 
the various subdivisions should lie with the nominees of 
the whole Commune instead of with the particular group 
immediately concerned." 

This method also overlooks the influence over the 
election of the council which the numerous body of 
officials would exercise. The selection of the officials by 
an elective body is, moreover, a task for which such bodies 

1 p. 158. 



CH. IV POLITICAL OUTCOME OF SOCIALISM 311 

are peculiarly unfitted, as the experience of Australia 
proves ; would, considering the number of officials in the 
socialist municipalities, offer serious difficulties to the 
council of a municipality, and would be absolutely 
impossible when all the innumerable officials conducting 
State industries had to be selected by the elective assembly. 
For such an assembly could not be conversant with the 
capacity of the many thousands of applicants nor with the 
requirements of the many thousands of posts to be filled. 
The assembly would, therefore, be compelled to make 
appointments at haphazard, or to merely sanction the 
nomination of some other body conversant with the facts, i.e. 
a body composed of superior members of the bureaucracy. 
Socialism, therefore, possesses no means by which can 
be controlled the Frankenstein which it must call into 
being. What, then, would the socialist bureaucracy do 
with the absolute power which it would wield ? That it 
would use it sooner or later for the purpose of serving the 
self-interest of its members cannot be doubted ; for the 
units composing it will be of the average type, inclined to 
selfishness and injustice. If it were otherwise, if all men 
were just and unselfish, there would not and could not be 
any injustice in the distribution of wealth, and the creation 
of the vast machinery of Socialism would be obviously 
unnecessary. Though socialists hold the irrational belief 
that the compulsory system which they aim at will hasten 
the ethical development of man, even those among them 
who are least sanguine with regard to the time necessary 
for the full development of the system, cannot seriously 
entertain the hope that the interval will suffice for the full 
adjustment of man to social conditions. Therefore the 
regulative agency of the socialist State must be composed 
of men who on an average are like to, or differ but little 
from, the present average man. Such men, possessing 
absolute control over the resources of a whole nation, will 
sooner or later use these resources for their own advantage. 
" The equality of distribution," " the equal reward of 
labour," might be continued for the regulated masses, but, 
in ways devious or open, the regulators would appropriate 
for their own use a far larger than the average share. The 



312 DEMOCRACY VERSUS SOCIALISM partiv 

bureaucracy would live in Roman luxury, marked off in 
startling ways from the correspondingly increased poverty 
of the subject masses. 

Furthermore, the love of offspring will not be 
extinguished by any social rearrangement. Men will 
still endeavour to secure to their children the same or 
higher positions than they themselves occupy. Hence the 
way of the socialist bureaucracy will be through nepotism 
to hereditary succession. A carefully graded hereditary 
caste, culminating in a hereditary despot, wielding absolute 
power over a people reduced to monotonous and slavish 
equality and deprived of all political and economic 
independence, would be the inevitable result. How easy 
it is to bring about such a revolution under democratic 
forms when a powerful bureaucracy aims at it, may be seen 
no less in the capture of nearly all the superior positions 
in the French army by members of the old aristocracy 
than in the coup d^etat of December 1851. Nor can it 
be denied that the socialist bureaucracy would infinitely 
exceed in power that wielded by the civil and military 
bureaucracy of France. 

Apart from and additional to these organised usurpa- 
tions, there will inevitably arise unorganised aggressions, 
which, prompted by the dishonesty, selfishness, and evil 
passions of individual officials, would nevertheless be 
shielded by the whole bureaucratic organisation. The 
inevitable spirit of caste pervading every organised bureau- 
cracy would be strengthened by still more powerful 
motives when the inevitable corruption had made sufficient 
way. At present, a male worker having incurred the 
enmity of foreman or manager, or a woman persecuted 
by the unwelcome attentions of one of them, may escape 
the consequences by changing his or her place of labour. 
No such evasion would be possible under the socialist 
regime, and even if, by official transfer, a man or woman 
escaped from the rod of a particular tyrant, nothing would 
be easier than to so mark his or her papers as to expose 
them to the like tyranny of new superiors. No man's 
life and liberty, no woman's honour, would be safe from 
the rancour or desires of officials. 



CH. IV POLITICAL OUTCOME OF SOCIAUSM 313 

The experience of the United States may again be 
cited in illustration of this danger. Out of the vast mass 
of available material I select one — the misuse of their power 
by the police of Chicago, a misuse which is fully equalled 
in other cities of the Union. The constitution of this 
force rests upon a democratic basis. The Mayor is elected 
by universal suffrage. He appoints the Chief of Police, 
who, in ;his turn, appoints the officers and men of the 
force. The Chief can be dismissed by the Mayor at any 
time, and, in his turn, can dismiss officers and men for 
cause shown. The whole force is thus placed as much, 
and more, under the control of the electors as if every 
police officer were directly chosen by them. Yet not only 
is this force generally regarded as corrupt, but it uses its 
power with absolute disregard of law, decency, and fair- 
ness to the poorer electors, as the following account will 
show. It is taken from a pamphlet^ published by Mr. 
John P. Altgeld, Governor of Illinois, in which state 
Chicago is situated : — 

" There had been labour troubles, and in several cases 
a number of labouring people, guilty of no offence, had 
been shot down in cold blood by Pinkerton men, and 
none of the offenders were brought to justice. The 
evidence taken at coroners* inquests and presented here 
shows that in at least two cases men were fired on and 
killed when they were running away, and there was, con- 
sequently, no occasion to shoot, yet nobody was punished ; 
that in Chicago there had been a number of strikes, in 
which some of the police not only took sides against the 
men, but, without any authority of law, invaded and broke 
up peaceable meetings, and in scores of cases brutally 
clubbed people who were guilty of no offence whatever." 

Mr. Altgeld supports this latter statement by citing 
the summing-up of Judge McAllister in the case of The 
Harmonia Association of Joiners versus Brenan et al., as 
follows : — 

" The facts established by a large number of witnesses 
and without any opposing evidence are, that this society, 
having leased Turner Hall for the purpose, held a meeting 

^ Rtatom for pardoning Fie/den^ Netht^ and Schwab, 



314 DEMOCRACY VERSUS SOCIALISM partiv 

in the forenoon of said day in said hall, composed of from 
200 to 300 individuals, most of whom were journeymen 
cabinetmakers, engaged in the several branches of the 
manufacture of furniture in Chicago ; but some of those 
in attendance were the proprietors in that business, or 
delegates sent by them. The object of the meeting was 
to obtain a conference of the journeymen with such 
proprietors, or their authorised delegates, with the view 
of endeavouring to secure an increase of the price or 
diminution of the hours of labour. The attendants were 
wholly unarmed, and the meeting was perfectly peaceable 
and orderly, and while the people were sitting quietly, 
with their backs to the entrance hall, with a few persons 
on the stage in front of them, and all engaged merely in 
the business for which they had assembled, a force of 
from fifteen to twenty policemen came suddenly into the 
hall, having a policeman's club in one hand and a revolver 
in the other, and making no pause to determine the actual 
character of the meeting, they immediately shouted, * Get 
out of here, you . . .,' and began beating the people with 
their clubs, some of them actually firing their revolvers. 
One young man was shot through the back of the head 
and killed. But to complete the atrocity of the affair 
on the part of the officers engaged in it, when the people 
hastened to make their escape from the assembly room, 
they found policemen stationed on either side of the 
stairway leading from the hall down to the street, who 
applied their clubs to them as they passed, seemingly with 
all the violence practicable under the circumstances.'* 

Another instance of similar conduct, supported by 
numerous affidavits, is thus summed up by Governor 
Altgeld : — 

"There was a strike on the West Division Street 
Railway, and some of the police, under the leadership of 
Captain John Bonfield, indulged in a brutality never 
equalled before ; even small merchants standing on their 
own doorsteps and having no interest in the strike were 
clubbed, then hustled into patrol waggons and thrown 
into prison on no charge, and not even booked. A petition, 
signed by about 1000 of the leading citizens living on 



CH. IV POLITICAL OUTCOME OF SOCIALISM 315 

and near West Madison Street, was sent to the Mayor 
and City Council, praying for the dismissal of Bonfield 
from the force, but on account of his political influence 
he was retained." 

When such brutal and illegal conduct on the part 
of officials, appointed by the election of the people, can 
go unpunished under existing conditions in the United 
States, where the bureaucracy is not numerous and power- 
ful, how can it be prevented under the conditions which 
Socialism will create? Even prominent advocates of 
Socialism have some slight perception of this danger, 
as is shown in the following statement made by Mr. 
and Mrs. Sidney Webb : ^ — 

"Though it may be presumed that the community 
as a whole would not deliberately oppress any section 
of its members, experience of all administrations on a 
large scale, whether public or private, indicates how 
difficult it always must be, in any complicated organisa- 
tion, for an isolated individual sufferer to obtain redress 
against the malice, caprice, or simple heedlessness of his 
official superior. Even a whole class or grade of workers 
would find it practically impossible, without forming some 
sort of association of its own, to bring its special needs 
to the notice of public opinion and press them effectively 
on the Parliament of the nation. ... In short, it is 
essential that each section of producers should be, at 
least, so well organised that it can compel public opinion 
to listen to its claims, and so strongly combined that it 
could, if need be, as a last resort against bureaucratic 
stupidity or official oppression, enforce its demands by 
a concerted abstention from work." 

The suggestion that aggrieved individuals might, " as 
a last resort against bureaucratic stupidity or official 
oppression," enforce their claims " by a concerted absten- 
tion from work," startlingly exhibits the want of com- 
prehension, from which all socialists appear to suffer, 
of the concomitant changes in social conditions which 
the establishment of Socialism must engender. For how 
are men to declare and maintain a strike in the face of 

^ Industrial Democracy ^ pp. 8z4, 825. 



3i6 DEMOCRACY VERSUS SOCIALISM partiv 

a bureaucratic power such as Mr. and Mrs. Webb them- 
selves deem it possible to arise imder Socialism ? Apart 
from direct punishments, which might easily be inflicted 
for such an act of insubordination, how are the strikers 
to maintain themselves for a single week ? All supplies^ 
food, clothing, materials for heating and cooking, and the 
many other daily requirements of a household, are in the 
possession of the bureaucracy. The bureaucracy would, 
therefore, have no difficulty in practising BebeFs maxim, 
that " he who will not work has also no right to eat." 
A mere mandate to refuse supplies to the strikers and 
their dependants would either enforce immediate sub- 
mission, or would end the trouble of officialdom by the 
speedy death of the strikers. 

The ultimate social and political outcome of Socialism, 
therefore, must be an all-pervading despotism on the part 
of the rulers, and a degree of slavery on the part of the 
ruled masses, such as has not existed in Europe even 
during the worst times of Roman and mediaeval oppres- 
sion. The slavery which accompanied Communism in 
ancient Peru would be reproduced, in an aggravated 
form, among the nations of Europe. Inevitably the 
time would come when, all initiative, all individuality, 
and patriotism having been crushed out, a catastrophe, 
like that which destroyed the Inca state, would overwhelm 
the nation, forming, perhaps, the starting-point of a new 
evolutionary process, by which, through a like apprentice- 
ship as that of the last thousand years, the people might 
re-arrive at the point at which they now stand, and 
choosing a worthier course, would enter upon the road 
to a wider and truer freedom, from which Socialism 
endeavours to seduce them. 



CHAPTER V 

THE INDUSTRIAL OUTCOME OF SOCIALISM 

The socialist organisation of industry, substituting State- 
regulation for self - regulation, compulsory co-operation 
for voluntary co-operation, equal reward for reward 
according to service rendered, must also rely upon other 
motives for exertion than those prevailing under a system 
of universal contract. 

The motive, and only motive, for industrial exertion is 
the desire to enjoy its fruits. If men could satisfy their 
material desires without industrial exertion they would not 
undergo such exertions. Likewise would they abstain if 
all reward were withheld from them. When men receive 
as a reward the full result of their mental and physical 
industrial exertions, the motive for such exertion is 
strongest. It becomes less active as a greater part of the 
result of their exertion is withheld from them. The 
efficiency of labour, therefore, other things being equal, 
is dependent upon the system of distributing the results 
of labour. In so far as this system is unjust ; in so far as 
the reward of one falls short of the services rendered by 
him, and the reward of another exceeds the value of his 
services ; in so far it must also reduce the efficiency of 
labour. For the men who are uncertain whether their 
exertions will meet with their due reward, and still more 
those who are certain that their due reward will be with- 
held, will not exert themselves to the fullest extent and 
their labour will fall short of its fullest efficiency. Still 
more will this be the case with those who expect or know 
that their reward will not be substantially affected if they 



31 8 DEMOCRACY VERSUS SOCIALISM partiv 

fail to labour efficiently. This divorce between exertion 
and reward is one of the main reasons for the universally 
recognised inefficiency of serf and slave labour. The 
existing system, suffering from injustice in distribution, 
largely reduces the efficiency of labour. Under Socialism, 
however, the reduction in efficiency must be very much 
greater. For though under the existing system the great 
majority receive rewards of less value than that of the 
services rendered by them, yet this reward generally falls 
and rises with the value of their services. The motive for 
exertion, while lessened, is not rendered inactive. Under 
Socialism, postulating equal rewards for unequal service, 
however, this motive would cease to exist. As no one 
could hope to increase his reward by increased mental and 
physical exertion, so no one could fear to lessen his reward 
by reduced exertion. Labour would, therefore, become 
infinitely less efficient than it is under existing conditions. 

Socialists urge two replies to these arguments. They 
contend that the desire for material reward is not the only 
motive for industrial exertion, and that self-interest will 
continue to stimulate individual exertions under a system of 
equal rewards. 

In support of the first contention, they cite the conduct 
of soldiers, who, though no material reward may await 
them, yet eagerly contend for the immaterial reward which 
valorous conduct brings. There is, however, no analogy 
between exhibitions of valour and industrial exertion. 
Other things being equal, the most courageous soldier is 
also the most popular with his comrades. If cowardice 
were admired as courage is, few would be guilty of acts of 
exceptional courage. Even if it were admitted that, under 
Socialism, exceptional exertion in industry would secure to 
him who habitually exhibits it as much admiration as acts 
of valour do now, the motives for exertion would still be 
largely reduced. For such popularity can and always 
would coexist with justice in distribution, and the expecta- 
tion of increased material reward is, therefore, an additional 
motive to the expectation of popularity. As one is less 
than two, the withdrawal of the former motive must lessen 
the inducement to exertion by at least one-half, even if it 



cHAP.v THE INDUSTRIAL OUTCOME 319 

were admitted that In Its absence popularity would attend 
exceptional exertions. 

Exceptional exertion, however, fails to secure popularity 
In the absence of justice in distribution. Among clerks In 
Government offices, he who earnestly strives to fulfil his 
duties, who wastes no time and renders the greatest 
service, is, as a rule, unpopular with his colleagues. This 
trait is still more pronounced among industrial labourers. 
In the gang system, prevailing In American boot-factories, 
the quickest workman is placed at the head of the gang, 
and the succeeding ones must keep pace with him or the 
material accumulates before them. This man, far from 
being popular, is generally the most unpopular. The 
reason Is, that his greater exertion imposes a like increase 
of exertion upon his fellows without any addition to their 
wages. This rule holds good throughout. The more 
efficient workmen are generally unpopular with their fellows, 
because their presence raises the standard of efficiency ex- 
pected from all without addition to their reward. 

Under Socialism this tendency would be much stronger, 
unless, as some socialists assert, self-interest will continue 
to induce increased exertion under their system of dis- 
tribution. This, the second contention alluded to, is, 
that, as the reward of each is determined by the total 
divisible product of all labour, this reward, though equal 
with that of all others, is nevertheless affected by the 
amount which the labour of any Individual contributes to 
the common stock. If, for Instance, the number of those 
amongst whom the social labour product Is divisible is 
one million, then the reward of an Individual labourer Is 
augmented by the one-millionth part of the product of 
any Increased exertion he may undergo. 

This argument admits, what socialists elsewhere deny, 
the Importance of self-interest as a motive for industrial 
exertion. For if, as this argument alleges, the receipt of 
an Infinitesimal part of the produce of his exertion is 
sufficient to stimulate every labourer, how much more 
stimulating must be the certainty of receiving all of it. 
An individual worker who, under Socialism, must divide 
the product of his additional exertion with millions of 



320 DEMOCRACY VERSUS SOCIALISM partiv 

others, cannot from this knowledge derive as much induce- 
ment to additional exertion as if he individually obtained 
the whole. Nor can his conduct be afFected by the ex- 
pectation that the special exertion of all others will equally 
swell his reward and that of each of them. For the 
individual worker does not know whether all the workers 
in the same factory are exerting themselves equally with 
him. Still less do the workers in one factory possess such 
knowledge with regard to the workers in other similar 
factories, or the workers in one department of industry 
with regard to all the workers in all other departments. 
The tendency, therefore, will be in the opposite direction, 
and disregarding the possibility of obtaining a share of the 
product of the additional exertions of others, each worker 
will only see the share which he contributes to the reward 
of others. 

Under Socialism, thferefore, still more than under 
the existing system, every worker would exert him- 
self as little as possible. Any workers who were to put 
forth greater exertions than the majority of their fellow- 
workers would become unpopular, because their example 
would raise the standard of exertion which foremen and 
managers would expect from all. Not only would the 
motive for exertion arising from coequal reward be 
absent, that of self-interest, but there would also be 
absent the other motive which socialists want to substitute 
for it, the approval of fellow-workers. On the contrary, 
self-interest would cause efficiency to be regarded with 
disapproval. 

The only substitute for voluntary co-operation is com- 
pulsory co-operation. Where men cannot hope to receive 
an increased individual reward for increased exertion, the 
only alternative, capable of inducing exertion, is compulsion. 
Fear must take the place of hope ; sullen resentment that 
of cheerful anticipation ; distaste for exertion that of joy 
in the work produced. The feelings and opinions of the 
slave-gang, cowering under the lash of a driver, must dis- 
place all other motives to exertion, and the efficiency of 
labour under Socialism must sink to the inefficiency which 
is the universal attribute of slave-labour. 



cHAP.v THE INDUSTRIAL OUTCOME 321 

The factors which thus tend to reduce to the lowest 
ebb the efficiency of the regulated labourers would like- 
wise tend to reduce the efficiency of the regulating 
organisation. 

All experience proves that industries are most efficiently 
conducted by individual undertakers. Where associations 
of capitalists, acting through paid managers, conduct in- 
dustries, the efficiency of management is generally impaired. 
Where the industry, so conducted, is based on a monopoly, 
the loss of efficiency is still greater, and it is most serious 
in industries conducted by governmental agencies. 

Various reasons account for these differences in 
efficiency. The individual undertaker is stimulated to 
the greatest mental and physical exertion by the know- 
ledge that his income will vary with the efficiency of the 
services rendered by him, and by the fear that competitors, 
rendering more efficient service, wiU deprive him of part or 
the whole of his income. 

The manager of a public company, whose income 
varies less directly and fully with variations in the efficiency 
of the services which the company renders, is under the 
domination of this motive to a smaller extent. Never- 
theless, inasmuch as the directly interested shareholders 
watch his conduct through some of their members, the 
board of directors, the manager's exertions are stimulated 
to some extent through hope of additional reward and fear 
of loss of position and reputation. 

Where an industry is based on monopoly, the income 
of the company conducting it does not necessarily vary 
with the efficiency of the services rendered by it. Such 
companies as, for instance, railway and tramway companies, 
may even increase their net earnings by rendering service 
of less efficiency. Hence the pressure of shareholders and 
directors on the managers in the direction of efficiency is 
either reduced, or absent, or pressure in the direction of 
less efficiency is substituted. 

When an industry is conducted by a governmental 
agency, no one is directly dependent for his income upon 
the efficiency of the services which the industry renders. 
The main motive stimulating mental and physical exertion 

Y 



322 DEMOCRACY VERSUS SOCIALISM part iv 

in the conduct of industries owned by private individuals 
and public companies being thus withdrawn, the manage- 
ment, almost invariably, becomes least efficient. 

Other causes co-operate in producing these variations 
in efficiency. Where one or more individuals, directly 
affected by the result, supervise the conduct of an in- 
dustry, personal initiative is least fettered and great 
flexibility possible. The wishes of individual clients can 
be easily responded to, new situations can be met quickly 
and easily, and the industry can adapt itself to changing 
conditions with the least friction. 

When an industrial undertaking is so large as to 
require an extensive and graduated managerial organisa- 
tion, much of this flexibility and adaptability is lost. 
Fixed rules, limiting the authority and prescribing the 
action of every unit in the organisation, must be substi- 
tuted for personal initiative. Each grade in the regulative 
machinery is more or less fettered ; the lower grades 
cannot grant unusual requests or adopt new methods 
without applying for permission to officers of superior 
grade ; these again transmit the request to still superior 
officers ; and invariably practice, more or less, takes the 
place of flexibility. 

This graduation, limitation, and inflexibility is greatest 
where an industrial undertaking forms merely a part of a 
still wider graduated organisation. For where this con- 
dition exists, the ultimate decision rests with officials 
generally possessing no personal knowledge of the cir- 
cumstances which induce the proposals of subordinates. 
Unwillingness to accept responsibility on the advice of 
subordinates, therefore, generally leads to the rejection of 
their proposals ; and even when they are adopted, the 
unavoidable delay frequently retards action till the con- 
ditions it was to meet have again changed. Invariable 
routine, involving great loss of efficiency, therefore, is the 
almost universal attribute of industries, the regulative 
agency of which forms part of the general governmental 
agency. 

These two causes combine to reduce the efficiency of 
governmental industrial undertakings to the lowest level, 



CHAP. V THE INDUSTRIAL OUTCOME 323 

even when, as at present, they are exposed to comparison 
or competition with similar private undertakings of 
greater efficiency. When, however, all industries are 
conducted by the State, when even this last stimulus is 
withdrawn — when, moreover, the regulative agency is no 
longer exposed to the stimulating influence of criticism in 
Press and Parliament, — the loss of efficiency in management 
must be infinitely greater than that exhibited by govern- 
mental industrial undertakings at the present time. 

Another factor must add to the loss of efficiency by 
both the regulated and the regulators. Labour is most 
efficiently performed when it accords with the innate 
tendencies of the labourer. A youth may make an 
excellent teacher when he would make but a wretched 
miner or bootmaker; another would render far more 
valuable services as a farmer than as an engraver ; still 
another would make an excellent business manager or 
engineer, but a very bad physician. Under the existing 
system, the number of those who, having special aptitude 
for one occupation, are nevertheless compelled to enter 
other occupations, is very great. A still larger nimiber, 
however, either from the start or ultimately, enter upon 
the occupations for which they are specially adapted. 

Under Socialism, however, special aptitude can be but 
rarely considered. Choice of occupation by the aspirants 
being impossible, it is equally impossible for the regulative 
agency to discover the special aptitude of the numerous 
aspirants for employment. A few possessing influence 
may obtain access to occupations which they prefer. The 
great majority, however, must accept the occupation to 
which they are allotted, and from which they may be 
transferred to any other as the necessities of the State or 
the caprice of officials may decide. With a few and 
accidental exceptions, special aptitude will thus be 
neglected, and men capable of doing exceptionally efficient 
work in one direction will be compelled to work in other 
directions in which their labour is specially inefficient. 
The loss of efficiency hence arising — a loss the magnitude 
of which is appalling — must be added to the loss arising 
from the causes previously dealt with. 



324 DEMOCRACY VERSUS SOCIALISM part iv 

Yet another cause must tend in the same direction. 
The efficiency of the national labour is largely determined 
by that of the available instruments of production and 
their amount. These instruments, made by labour, must 
be replaced by labour. Every year large deductions are 
made from the amount of consumption-goods otherwise 
available, by setting labour to produce production-goods, 
the fruits of which may not ripen till many years hence. 
This production of capital, ever increasing and providing 
for wants of an ever later date, is one of the functions 
which our society performs unconsciously. Under Social- 
ism it would have to be performed consciously. The 
regulative authority would have to determine each year 
how much of the national labour shall be employed in the 
replacement and extension of national production-goods. 
The labour thus employed is withdrawn from the pro- 
duction of goods which can satisfy wants in the near 
future, and directed towards the satisfaction of wants 
which may arise in the distant future. A large and ever- 
increasing deduction is made from the national dividend 
becoming divisible in any year, in order to increase the 
dividend which may become divisible in distant future 
years. Will the officials be anxious to sustain such a 
far-sighted policy, and will the people welcome it ? The 
probability is ail the other way. The majority of any 
people are short-sighted and improvident, unwilling to 
renounce present enjoyment for future enjoyment. Still 
stronger is this tendency when the abstention from present 
enjoyment is not manifestly to their own incUvidual 
advantage and that of their children. Those who are 
improvident will desire the largest possible dividend from 
the national labour in order to enjoy it. Those who arc 
provident will desire the same in order to increase their 
individual savings. A large deduction from the national 
dividend for the adequate replacement, and still more for 
the extension, of the national capital will, therefore, be 
extremely unpopular with the large majority. Similar 
sentiments animate the official hierarchy, which, moreover, 
would derive no immediate and personal benefit from an 
action which, nevertheless, would expose it to great un- 



CHAP. V THE INDUSTRIAL OUTCOME 325 

popularity. Hence must arise a tendency, not only to 
abstain from adding to the national capital and to the 
length of productive processes, but to actually curtail the 
replacement of national capital and to reduce the length 
of productive processes, and, consequently, to a further 
reduction in the efficiency of the national labour. 

Four powerful causes thus co-operate to reduce the 
efficiency of labour under Socialism. They are : — The 
withdrawal of all motive for mental and physical exertion 
in production when reward is divorced from the value of 
the service rendered. The substitution of compulsory 
co-operation for voluntary co-operation. The neglect of 
special aptitudes, and the reluctance to extend, if not the 
desire to shorten, processes of production. 

The inevitable result of reduced efficiency is a re- 
duction of the amount and a lowering of the quality of 
goods and services produced. As already pointed out,^ 
equality of reward and the determination by the regulative 
agency of the kinds and quantities of goods to be 
produced by the national labour, must inevitably lead to 
an enormous reduction in the kinds and qualities of goods 
produced. The tendency must be to confine production 
to as few designs, colours, and qualities of every kind of 
goods as practicable, and to make these permanent. The 
tendency towards monotony and uniformity thus arising 
would be supported and strengthened by the falling-off in 
production due to inefficiency. As labour becomes less 
productive, the production of goods required for comfort 
and for ornamentation must be curtailed, and labour must 
be concentrated upon the production of bald necessaries. 
With every further loss of efficiency this process must be 
extended, until the national dividend, receivable by every 
citizen, will consist of a smaller amount and variety of 
goods and services than is now at the command of average 
artisans. Not only monotonous uniformity, but general 
poverty, is thus the inevitable result of Socialism. Equality 
of income will be achieved at least among the regulated 
masses. But it will not be done by raising the income of all 
to a level above that enjoyed by the great majority of the 

1 Part IV. chap. ii. 



326 DEMOCRACY VERSUS SOCIALISM part iv 

people to-day. On the contrary, the income of all will be 
reduced to the level of that which is now the lot of those 
whose condition appeals most strongly for relief. Instead 
of raising the material condition of this unfortimate 
minority, Socialism must lower to their level the material 
condition of all. A monotonous equality in unavoidable 
poverty will be the condition of the whole people in the 
socialised State. 



1 



CHAPTER VI 

THE FAMILY UNDER SOCIALISM 

Race-preservation entails the subordination of the life 
of the individual to that of his offspring. In many of the 
lower forms of life this subordination is carried so far, that 
parental life ceases with the act of reproduction. During 
the course of the evolutionary process, however, the drain 
on parental life decreases, mainly by substituting post- 
natal care of offspring for stupendous fertility as a means 
of securing the continuance of the species. Post-natal 
care of offspring, moreover, involving the satisfaction of 
parental love, affords compensation for parental sacrifices. 
Among the most highly evolved animals, therefore, an 
approximate reconciliation is reached between individual 
interests and the interest of the species, through a great re- 
duction in the drain on parental life, and in the compensation 
afforded by the experience of vividly felt parental pleasures. 
In the human race the reconciliation between the life 
of the individual and the life of the race is carried still 
further, and it culminates in the most highly evolved 
races of men. Among savages parenthood begins at an 
early period ; mortality of children is great and is 
compensated for by many births ; the life of individuals is 
but little prolonged beyond the reproductive period ; and 
parental pleasures are enjoyed only for a comparatively 
short time. Among the most highly civilised races, on 
the other hand, the period of life preceding reproduc- 
tion is most prolonged ; mortality during childhood and 
adolescence smallest ; the number of births fewest ; the 
period of life following cessation of reproduction longest ; 



328 DEMOCRACY VERSUS SOCIALISM partiv 

and the companionship of parents and children being 
longest, parental pleasures are enjoyed during a longer 
period and with greatest intensity. It follows that the 
highest ethical and sociological relation of the sexes is that 
which ensures the continuation of the race with the least 
sacrifice of parental life to the lives of progeny, while 
affording the greatest satisfaction of parental love. 

The regular relations between the sexes among civilised 
nations and the corresponding sentiments are a result ot 
evolution. Among the lowest savages these relations are 
unregulated and promiscuous. Chastity of either males 
or females is not valued ; and even when the possessory 
instinct causes men to place a restraint on the women 
appropriated by them, they easily give their consent 
to temporary cohabitation with other men. As higher 
types of human society evolve, marital relations become 
more definite, and chastity, at least of females, comes to 
be valued. Among the highest types, the marital relation 
has become most definite and permanent, chastity has 
come to be regarded as a cardinal virtue in females, and 
its absence is beginning to be despised in men. Prepress 
towards higher types of human society is thus inseparably 
accompanied by progress towards higher — more definite 
and permanent — marital relations. 

At the same time, these relations have grown more into 
accordance with the recognition of equal rights. Poly- 
andry grants a licence to women which it denies to men, 
polygamy grants to men a licence which it denies to women. 
Monogyny alone recognises the equal rights of the two sexes. 

The evolution of higher animal types is dependent 
upon the growth of parental feelings and the consequent 
prolongation and intensification of parental care. In the 
human race parental care is more elaborate and prolonged 
than in any animal species, and grows more elaborate and 
prolonged with every advance in type. Among the highest 
races it not only embraces the children while they reside 
in the parental home ; not only employs complex agencies 
for physical and mental culture and moral discipline, but 
it follows children into the world and provides them ynth 
means for material wellbeing. With this elaboration and 



cH.vi THE FAMILY UNDER SOCIALISM 329 

prolongation of parental care, the outcome of a greater 
intensity of parental love, there arises filial and fraternal 
attachment and love. Unknown among animals, feebly 
developed and short of duration among savages, filial and 
fraternal love and the consequent care of aged parents, of 
sisters and brothers, becomes gradually stronger as higher 
types evolve from lower, until among the most highly 
evolved members of the highest types of men it blossoms 
into lifelong gratitude and ardent filial and fraternal de- 
votion. 

The parental, marital, filial, and fraternal relations, thus 
binding together several generations, are sources of the 
greatest and purest happiness. Resting, not upon self- 
love, but upon the love of others, the happiness experienced 
by each is derived from the happiness conferred upon 
others. The greatest sum of human happiness, therefore, 
arises from those marital relations which, most closely 
and permanently uniting the lives of husband and wife, 
parents and children, secure the continuation of the race 
with the least nimiber of births. 

The marital relation which most efficiently subserves 
these objects is the permanent, monc^ynic relation, which, 
as a consequence, is that of all the highest types of human 
society. The permanent and exclusive companionship of 
one man and one woman, resulting in common interests, 
sentiments, and tastes, and involving mutual sacrifices, 
continuously intensifies the marital affections. Their 
common love for their joint children reflects upon the 
feelings of the latter and binds them together into fraternal 
affection. The absence of the jealousies and contentions, 
inseparable from polygynic unions, intensifies marital, 
parental, filial, and fraternal affections. The care of 
children being permanently assumed by both parents, both 
secure the largest measure of satisfaction of parental love, 
while securing the wellbeing of the children more efficiently 
than if, as in temporary unions, it devolved upon one 
parent alone. As a consequence, the mortality of children 
is reduced and a smaller number of births suffices to ensure 
the continuation of the race. 

Socialism, modifying, to a considerable extent, the 



330 DEMOCRACY VERSUS SOCIAUSM part iv 

permanent monogynic relation of the sexes, must in this 
and other ways alter the constitution of the family, and, 
therefore, must lead to retrogression in this, the most 
important, as in other spheres of social life. As shown in 
Part I. chapter vi., among its immediate results are : the 
economic independence of women ; the abandonment of 
separate family homes and the early separation of children 
and parents, and the transference of the former to the 
care of the State. The further results following upon 
these profound modifications of the constitution of the 
famUy must now be examined. 

The separation of children from parents at a tender 
age destroys the opportunity for the development of 
parental love, which grows upon the daily and hourly 
self-sacrifice which the care of young children demands. 
Still more must it destroy the opportunity for the develop- 
ment of filial and fraternal affections. The greatest and 
purest opportunities for happiness must thus be destroyed 
by Socialism. 

The loss of this happiness must be accompanied by 
the loss of ethical training and sentiments of the highest 
order. The care of children, involving constant sacrifices 
of self-regarding desires, affords the highest training in 
altruistic sentiments. Hourly and daily the parents, and 
especially the mother, must subordinate their egotistic 
pleasures to the welfare of their children. This train- 
ing in self-sacrifice, this evocation of unselfish emotions, 
influences the character of the race and, accumulating in 
influence from generation to generation, originates and 
furthers altruistic sentiments in other social relations. At 
the same time, the ethical standard is still further raised 
by the influence which such self-sacrifice and the general 
purity of the home-life exercises upon children. The 
constant experience of and training in unselfish actions 
strengthens the altruistic sentiments hereditarily derived, 
and the love and reverence of sons for mothers and sisters 
is the foundation of the respect for womanhood in 
general. 

As parental love is the source of all altruistic senti- 
ments and emotions, so does the care of parents for children 



cH.vi THE FAMILY UNDER SOCIAUSM 331 

afford the highest training in altruism. Not only would 
the further evolution of dtruistic sentiments be hindered 
by the early surrender of children to the State, but the 
individual training in altruism would also cease. The 
altruistic sentiments, which, however deficient as yet, have 
nevertheless made great progress, would thus gradually 
be lost again, and there must rise such selfishness as would 
ultimately threaten the very existence of human society. 
Just as higher types of human society have arisen through 
the better discharge of parental responsibilities, so must 
the non-discharge of such responsibilities by parents lead 
to the re-evolution of lower types, to the decadence of the 
human family into mere animalism. 

Another consequence must arise. The bearing of 
children, connected as it is with physical restraint and 
intense suffering, is undergone reluctantly by all women. 
The only compensation for the sacrifices involved, the 
only consideration which makes it acceptable to women, 
is the expected satisfaction of the maternal sentiment from 
the loving care for the new-born child. Will maternity 
be accepted with like willingness when this compensation 
is withdrawn ; when the new-born babe is taken from its 
mother after a few weeks or even months ; when during 
the agony of parturition the mother looks forward to the 
further agony of losing her child ? That under such cir- 
cumstances women will be willing to take upon themselves 
the suffering and sacrifices involved in the bearing of 
children seems unlikely. Under Socialism, therefore, the 
birth-rate is certain to contract, and in all probability will 
contract to an unprecedented extent. The socialist 
nations, instead of expanding, will become reduced in 
numbers, the birth-rate will fall below the death-rate, and 
Socialism will ultimately disappear because socialists have 
died out. 

The general reluctance, if not refusal, of women to bear 
children must have further consequences. It robs the sexual 
relation of its ethical justification and value, and, therefore, 
leads to the degradation of both men and women. Marriage 
itself, when Nature's design is deliberately frustrated, is 
hardly to be distinguished morally from prostitution, even 



332 DEMOCRACY VERSUS SOCIALISM part iv 

when the relation remains permanently monogynic. But 
under the conditions created by Socialism it cannot rem^n so. 
Woman, deprived of the satisfaction of the emotions which 
the love and care of her children yields, will seek to fill 
the void in other ways. Failing to find full satisfaction for 
her yearnings — ^probably not fully understood — in the com- 
panionship of her husband, she will look for it elsewhere ; 
and, still unsatisfied, will go further afield. Divorce and 
re-divorce will become so largely desired, that it must be 
made easy ; and will be so largely availed of, that marriage 
generally becomes but a temporary arrangement. 

Other considerations support this view. While the 
maternal sentiment is highly developed in most women, 
the majority of women as well as men do not feel other 
emotions very deeply. The love of which poets sing ; 
the love which laughs at all obstacles and possesses the 
soul to the exclusion of everything else, is not the lot of 
the common herd. Minor emotions, more fleeting and 
less ennobling than this, draw them to the great purpose 
of life — the continuation of the race. The great majority 
of marriages, therefore, as yet, are not and cannot be 
perfect unions. When the first delirium is over, the 
hero's dimensions shrink to those of an ordinary man and 
the angel loses her wings. Then come the weeks and 
months which try temper and nerves ; during which both 
would gladly exchange the marital yoke for their former 
freedom. But there is no ground for divorce, and shame 
as well as pecuniary considerations prevents separation. 
Presently, approaching motherhood invests the wife with 
a new glory in her husband's eye ; his tenderness, as well 
as the further joy that awaiteth her, clothes life in its 
brightest colours. When the baby is born, its innocent 
hands constantly strengthen bonds which otherwise would 
yield under the strain, and its smiles forge other and more 
powerful ones. Gradually, under the influence of their 
common life — common interests and common love of 
children — ^husband and wife find each other, and the union, 
at one time so unpromising, becomes more perfect the 
longer it lasts, securing to both the utmost happiness of 
which their defective natures are capable. 



CH. VI THE FAMILY UNDER SOCIAUSM 333 

It will be far difFerent under Socialism. The pecuniary 
independence of women will cause them to be less patient 
with the ill-temper of a badly bred or exacting husband ; 
the absence of a separate family home, involving public 
repasts and the spending of all spare time in public, pre- 
vents the close intimacy under which the nature of husband 
and wife mingle till they are one. The absence of children, 
or their removal from parental care, deprives the union of 
any ethical value and of the only bond which can tie it 
securely. In the great majority of instances, therefore, to 
the unsatisfied maternal emotions there will be added actual 
dissatisfaction with their marital lot either on the part of 
husband or wife or both. These influences must tend to 
multiply divorces, while the influences tending towards 
restraint have been removed. Divorces and re-divorces, 
therefore, must tend to increase, till public opinion will 
see nothing shameful in the most frequent changes 
of marital relations. The chastity of women, already 
approaching perfection, and the chastity of men, which, 
though as yet far from perfect, has nevertheless improved 
and is still improving, will be lost again. Licence will 
take the place of restraint, a licence such as Rome indulged 
in during her decline, when reluctance on the part of 
women to bear children, accompanied by the utmost 
profligacy, prepared the downfall of the rulers of the 
world. 

The influence of these conditions must deprive large 
numbers of women of all chance of permanent happiness. 
The attractiveness of woman to man, being more physical 
than that of man for woman, wanes earlier. Middle-aged 
men, therefore, may and frequently do attract young 
women, while in exceptional cases only do middle-aged 
women possess any sexual attractiveness for young or 
middle-aged men. Whatever, therefore, lessens the perma- 
nency of the marital relation must tend to deprive numbers 
of women of male companionship during their declining 
years. The condition which Socialism must create, being 
that of extreme instability of the marital relations, must, 
therefore, react unfavourably on the lives of women to an 
incalculable extent. 



334 DEMOCRACY VERSUS SOCIAUSM partiv 

Meanwhile, the training of the children by the State, 
while adding to these tendencies, must produce further evils. 
This training must in the first instance be undertaken by 
professional nurses, to each of whom many infants must 
be entrusted. Though their training may give them a 
better knowledge of the treatment of infants than many 
mothers possess, yet that knowledge cannot compensate 
for the sleepless watchfulness of a mother and her constant 
care. The high death-rate of foundling hospitals, while 
to some extent accounted for by the origin of their inmates, 
is, nevertheless, largely due to this substitution of pro- 
fessional for maternal care. The death-rate in the State 
nurseries, therefore, will be similarly great, adding to the 
tendency to depopulation previously described. 

The surviving children, from the earliest dawn of 
their intelligence, will be exposed to influences far differ- 
ent from those which would have shaped their character 
in the parental home. For the training through sympathy 
will be substituted a training through fear. The elastic 
bounds to the natural wilfulness of children, which 
parental care accommodates to the proclivities of each child, 
will give way to fixed rules to which all children must 
accommodate themselves. The dawning intelligence of 
childhood, provoking constant questions in its endeavour 
to understand, will be repressed and confined to fixed and 
uniform lessons. Breach of rules will lead to punishment, 
but no expression of love will encourage and meet repent- 
ance. At the very time, therefore, when the intelligence 
of the future men and women is most easily impressed, 
when as a consequence the foundation of character is 
being laid, influences are at work which must deteriorate 
character. Absolute, unquestioning obedience ; abject 
fear of persons in authority ; selfishness, untruthfulness, 
and moral cowardice, must be the attributes of persons 
whose early childhood has been exposed to such conditions. 

The retrogression here sketched will be aided by 
another cause. As the children of those less adapted to 
the requirements of social life will be exposed to exactly 
the same conditions as the children of those better 
adapted, all will have an equal opportunity to survive. 



cH.vi THE FAMILY UNDER SOCIAUSM 335 

Instead of the survival of the fittest, i.e. those best adapted 
for the requirements of social life, there will arise the 
survival of the physically strongest, regardless of other 
and socially more important qualities. Mere physical 
strength will supplant the socially beneficial qualities, add- 
ing hereditary retrogression to the retrogression induced 
by training. 

Socialism, disregarding the lessons of evolutionary 
history in the sphere of the family, as it disregards them 
in other spheres, must bring the utmost evils on the 
nations which adopt it. Nature inevitably punishes the 
breach of any of her laws ; where the breach is great the 
punishment is great and terrible. All life arises from the 
due discharge of parental responsibilities, and only through 
the better discharge of such responsibUities have higher 
types of life been evolved. To disregard this law is to 
abandon the very foundation of social life. Retrogression, 
decay, and eventual extinction will inevitably follow upon 
such action ; they are the fruits which grow upon the 
tree of Socialism. 

Lest it be said that the picture here drawn is unjust to 
socialists and Socialism, it may be prudent to cite some 
evidence that it is not so regarded by many leading 
socialists. A few quotations from the interminable mass 
available will, on the contrary, prove that these socialists 
aim at bringing about exactly such conditions as have 
here been shown to be the inevitable outcome of the 
adoption of Socialism. Nevertheless must it be remem- 
bered that the great majority of socialists may be and 
probably are out of sympathy with these aims and 
ignorant of the goal to which Socialism leads. 

" Human beings must be in a position to act as freely, 
where their strongest impulse is concerned, as in the case 
of any other natural instinct. The gratification of the 
sexual impulse is as strictly the personal aflfair of the in- 
dividual as the gratification of any other natural instinct. 
No one has to give an account of him or herself, and no 
third person has the slightest right of intervention. . . . 
All these checks, all these contradictions to nature, in the 
present position of women have led even persons who arc 



336 DEMOCRACY VERSUS SOCIALISM partiv 

not disposed to accept the further consequences of change 
in our present social state to recognise the justifiability of 
a perfectly free choice in love, and, if need be, of an 
equally free dissolution of the relationship, without any 
external hindrance." ^ 

"The present marriage system is based upon the 
general supposition of the economic dependence of the 
woman on the man, and the consequent necessity of his 
making provision for her, which she can legally enforce. 
This basis would disappear with the advent of social 
economic freedom, and no binding contract would be 
necessary between the parties as regards livelihood ; while 
property in children would cease to exist. . . . Thus a 
new development of the family would take place — an 
association terminable at the needs of either party." * 

"The present marriage laws hinder the socialist ap- 
proach to the ideal. Because we hold Socialism will 
ultimately survive as the only tenable moral code, we are 
convinced that our present marriage customs and present 
marital law must alike soon coUapse. ... In a socialist 
form of government, the sexual relation would vary 
according to the feelings and wants of individuals. . . . 
Children apart, we hold it intolerable that Church or 
Society should in any official form interfere with lovers." * 

" It would be the duty of the State to scientifically 
investigate the whole system of checks and to spread 
among its citizens a thorough knowledge of such as were 
harmless and efficient in practice."* 

" Marriage is a life sentence, not even reducible to a 
term of twenty years. . . . Monogamic marriage — a 
thing obviously and by its nature degrading. . . . Per- 
haps the most decent thing in true marriage would be to 
say nothing, make no promises either for a year or for a 
lifetime. ... It would be felt intolerable in any decently 
constituted society that the old blunderbuss of the law 
should interfere in the delicate relations of wedded life." * 

^ Bebel, " Woman," JVoman in the Future^ pp. 229, 230. 
' William Morrif and £. B. Bax, Socialism^ p. 199. 

' Karl Pierton, Socialism and SeXj pp. 5, 6, 8, and 14. ^ Bid, p. 15. 

' Edward Carpenter, Marriage in Free Society, pamphlet published by The Liboar 
Press Society. 



CHAPTER VII 

THE ETHICAL OUTCOME OF SOCIALISM 

Human beings are modifiable physically and mentally. 
Hereditarily derived qualities, by small changes, are 
brought into harmony with external conditions. Every 
theory of physical and mental training ; every proposal to 
encourage virtue and to discourage vice ; every attempt 
to develop moral sentiments and aesthetic perceptions, is 
based on the recognition of the fact, that the use or dis- 
use of faculties is followed by an adaptive change in them, 
resulting in increase or loss of power. 

Moreover, such modifications are inheritable. By the 
accumulation of small changes from generation to genera- 
tion, constitutions are adapted to outward conditions. A 
climate, fatal to other races, is innocuous to the adapted 
race. Races have become immune to diseases previously 
fatal to them, and still fatal to other races. Powers of 
smell and sight have diminished among civilised races, 
while the strength of reason and the breadth of emotions 
have increased. Similarly, races sprung from the same 
stock have acquired different aptitudes and tendencies 
under the influence of different historical and geographical 
surroundings. This process of differentiation is going on 
at the present day in a manner easily recognisable. The 
people of the United States and of the Australian colonies, 
even those of purely British stock, are developing national 
characters and physical types, differing from those of each 
other and from those of the parent stock, under the in- 
fluence of the new conditions in which they are placed. 
This process of adaptation is proceeding always and every- 

z 



338 DEMOCRACY VERSUS SOCIAUSM partiv 

where. It follows, therefore, that like adaptive modifica- 
tions of character must follow every change in the social 
environment. 

It is true that the ideas and sentiments of the indi- 
vidual members of a society tend to mould the character 
of that society into harmony with themselves. It is, 
however, no less true that the control exercised by any 
society over its members tends to mould their ideas and 
sentiments into congruity with its character. Mutual 
modifications thus becomes cause of transformation in 
both. Changes in the nature of the individuals compos- 
ing a social organism sooner or later find expression 
in corresponding changes in the structure of the organism ; 
and changes in the structure of the social organism bring 
about corresponding changes in the nature of the individuals 
composing the organism. These changes find expression 
in the average feelings and opinions of individuals. Quali- 
ties which are regarded as virtues in one state of society 
come to be regarded as vices in another, and vice versd. 

Among savages, living almost exclusively on the pro- 
duce of the chase, where the consumption of one must 
necessarily lessen the opportunity of all others to maintain 
themselves, where, as a consequence, unserviceable mem- 
bers of the horde are almost as great an evil as the en- 
croachment of another horde on the tribal hunting-grounds, 
cruelty and treachery are regarded with supreme approval. 
The impossibility of carrying on military operations on a 
grand scale without strict discipline and obedience causes 
another set of sentiments to be valued amongst great 
military nations. Unswerving loyalty and unquestioning 
obedience are held to be supreme virtues, and disloyalty 
and disobedience are regarded as the worst of crimes. 

Among industrial nations, trained in the regime of 
contract, where service is exchanged for service, still 
another set of sentiments is valued. Resistance to un- 
authorised exercise of power, love of freedom and inde- 
pendence, justice and honesty, are regarded as cardinal 
virtues ; while servile submission to the wiU of superiors 
and dishonesty are regarded with contempt, and cruelty 
with horror. 



cH.vii ETHICAL OUTCOME OF SOCIALISM 339 

Innumerable and incongruous minglings of these 
several sets of sentiments correspond with the multitudi- 
nous stages in the transition from one to another of these 
several social states. They may be observed even among 
civilised nations. In Russia the preponderance of militarism 
causes loyalty and unquestioning obedience to authority to 
be regarded as the supreme virtues, and successful lying 
to be admired. Nevertheless, the small amount of indus- 
trialism which prevails has to some extent created respect 
for honesty, love of freedom, and justice. In Germany, 
where industrialism is more highly developed, love of 
freedom, independence, and honesty are regarded as 
virtues of siniilar rank to loyalty and obedience. In 
Great Britain, and in her self-governing colonies, as well 
as in the United States, the preponderance of industrialism 
causes independence, honesty, love of freedom and of 
justice to be regarded as virtues of the first rank, without 
as yet entirely removing the respect thought to be due to 
loyalty and obedience. 

Socialism, profoundly modifying the structure of 
society, must cause a like profound modification of ethical 
conceptions. The natures resulting from a life carried on 
under compulsory co-operation and equality of reward 
must differ widely from those resulting from a life carried 
on under voluntary co-operation ana the conformity of 
reward to service rendered. While it is not possible to 
depict in detail the resulting ethical changes, the experi- 
ence of the past, nevertheless, enables a general forecast 
to be made. 

In a community in which all the affairs of life are 
regulated by governmental agencies, where men and 
women, from their earliest childhood, are accustomed to 
act in obedience to such agencies, they must come to 
forget that affiiirs can be otherwise regulated. The 
members of the regulated classes are not allowed, and from 
early childhood have not been allowed, to do anything 
except what some superior prescribes. These superiors 
themselves are bound by strict regulations which cannot 
be suspended except by some official of a higher grade, and 
these, again, are dependent for unusual acts upon the 



340 DEMOCRACY VERSUS SOCIAUSM partiv 

permission of still higher authorities. Men whose every 
action has been and is thus controlled and regulated by 
more or less distant and generally unknown authority, 
lose the habit of acting upon their own impulses, and the 
consciousness that independent action is possible. Com- 
parison of the numerous philanthropic, artistic, scientific, 
educational, and other objects achieved by the volimtary 
co-operation of private persons in Great Britain and the 
United States, with the paucity of such instances of indi- 
vidual initiative in Russia, and even in Germany and 
France, exhibits the tendency towards dependence upoh 
authority which the exercise of authority engenders. 

Socialism, with its necessarily minute regulation of 
every industrial action, and extensive regimentation of the 
regulative agency, must develop this tendency to an 
almost inconceivable extent. Personal initiative and enter- 
prise having become impossible, the consciousness of their 
possibility and the habit of independent action must be 
superseded by passive reliance upon authority and dumb 
obedience to its orders. 

The recognition of equal rights, and the sense of 
justice and independence, result from the relation of 
contract. Under this relation every benefit is consciously 
purchased by effort, by rendering some benefit in return. 
Every individual rendering a service is entitled to obtain 
from others such service in return as the value of the 
former warrants. The daily and hourly recurrence of 
such exchanges under agreement, and the consequent 
balancing of claims, involves the maintenance of self- 
right? and the sympathetic recognition of other rights. 
Hence arises habitual recognition of equality of rights, i.e. 
the sense of justice, of independence and love of freedom, 
leading to resistance to the exercise of unauthorised power 
and to acts of injustice. 

Socialism, substituting status for contract, must also 
substitute related sentiments for those which originate 
in the relation of universal contract. The cessation of 
contracts must terminate the constant recognition of the 
equal rights of the contracting parties upon which all con- 
tracts are based. The constant fostering of the assertion 



CH. VII ETHICAL OUTCOME OF SOCIALISM 341 

of self-rights, and of the recognition of others' rights, 
therefore, is^lost, and must ultimately lead to the loss of 
the correlated sentiments, the sense of justice prompting 
resistance to infringement of rights. Aggression thus 
made easy must still further obscure the sense of justice, 
and miist weaken still further resistance to aggression, 
until slavish submission to every act of the governing 
authorities becomes the universal sentiment. Resistance 
to governmental acts of any kind then becomes disloyalty, 
and slavish obedience the cardinal virtue. 

This tendency is strengthened by the substitution of 
compulsory co-operation for voluntary co-operation ; of a 
universal " you shall " for " I will do as much for you as 
you will do for me." No longer is it impersonal necessity 
which compels men to work, but personal authority. 
Authority determines the hours, nature, and place of 
occupation of every man and woman, and none, among 
the regulated classes, can know the reasons which dictate 
the orders which they must obey. These orders may 
result from necessity or caprice, from benevolence or 
malevolence, but they must be obeyed all the same. 
Slavery, therefore, takes the place of the existing in- 
sufficient freedom, and from it must result the sentiments 
which have accompanied slavery everywhere. Personal 
initiative is lost ; the sense of freedom, the recognition of 
personal rights, must be lost ; while blind obedience to 
orders is the one sentiment constantly fostered among 
the regulated masses. 

This tendency is still fiirther added to by the loss of 
all perception of impersonal causation in social affairs. 
When all such affairs are regulated by authority, the idea 
of self- regulation in soci^ processes must disappear. 
Belief in personal causation must supplant the belief in 
impersonal evolution. Hence must result a still further 
belief in, and reliance upon, the omnipotence of the State, 
and a total loss of the perception that social ameliorations 
are brought about otherwise than through the compulsory 
action of governmental agencies. 

With the loss of the perception of personal rights and 
of the sense of independence, loss of honesty and truthful- 



342 DEMOCRACY VERSUS SOCIALISM part iv 

ness must go hand in hand. To *' speak the truth and fear 
no man " are correlated sentiments. Truthfulness is the 
direct outcome of self-respect, as self-respect is the out- 
come of the maintenance of personal rights. Where, as 
under Socialism, these rights are denied and lost sight of ; 
where the individual from earliest infancy is placed at the 
command of a power which controls and regulates all his 
actions ; where compulsory labour takes the place of 
voluntary labour, and fear of punishment is the only 
incentive to exertion, — honesty and truthfulness must 
disappear. Deceit and lying are the only weapons of 
defence under Socialism, as under every other form of 
slavery; and as, for this reason, they have become the 
universal trait of subject populations, so must they be- 
come the trait of the regulated masses imder Socialism. 

As shown in the preceding chapter, similarly related 
sentiments must arise from the destruction of family life. 
The sense of chastity must be lost ; so must be lost the 
altruistic sentiments which, arising from parental solicitude, 
bind man to man and generation to generation. Brutal 
selfishness, wallowing in animalism, must submerge alike 
the brightest flowers and the unfolding buds of himian 
evolution. 

The members of the socialised State, becoming men- 
tally and morally adapted to this State, become unadapted 
for any other. Instead of honesty, truthfulness, chastity, 
unselfishness, a high sense of justice and of independence, 
being regarded as the highest attributes, implicit obedience, 
faith in and submission to authority, must come to be 
regarded as supreme virtues ; and injustice, unchastity, 
selfishness, untruthfulness, and dishonesty will provoke no 
censure and no repulsion. Instead of gradually rising to 
a higher moral state, mankind would fall back to the low 
level of ethical perceptions from which it has been rescued 
by the painful experience, the suffering and martyrdom, 
of untold ages. 



PART V 



THE SINGLE TAX 



[• 



CHAPTER I 



INTRODUCTION 



Man does not live by bread alone. Even if it were 
shown that Socialism could and would provide all with 
more wealth than ordinary artisans now enjoy, there 
would still arise the question, whether it would not 
deprive men of other possessions ; of possessions so far 
superior to a mere increase in wealth that past generations 
have cheerfully sacrificed not only wealth, but life itself, 
in their defence. In the foregoing examination it has 
been shown that not only would Socialism sacrifice these 
higher possessions of mankind, but that this sacrifice 
would not be accompanied by any improvement in the 
material condition of the people. 

At the same time has been indicated the cause which 
produces injustice in the distribution of wealth, and the 
secondary evils thence arising, as well as the reform which 
can remove this injustice, not only without sacrifice of the 
higher possessions of mankind, but while adding to them. 
This cause we found to consist of the legislative creation 
of private monopolies, especially of the monopoly of the 
land. 

The removal of this cause, by the termination of all 
monopolies which owe their origin to special laws, and 
the appropriation by the social body of all natural mono- 
polies, would, therefore, terminate the evil results which 
flow from this cause. 

Before entering upon a detailed exposition of the 
manner in which this reform may be applied, so as to 
combine the greatest production of wealth with absolute 



346 DEMOCRACY VERSUS SOCIALISM part v 

justice in its distribution, and without sacrificing any of 
the higher possessions of mankind, it may be useful to 
recapitulate some of the conclusions arrived at. 
The principal ones were : — 

( 1 ) That all the members of a State are entitled to 
equal rights and equal natural and social opportunities. 

(2) That every member of a State is entitled to the 
full and exclusive possession of all the wealth which his 
labour produces from equal opportunities with all others, 
or which he receives under contract for services rendered 
by him under the same conditions. 

(3) That social injustice arises solely from the in- 
fringement by the State of the claim of all to equal rights 
and opportunities ; such infringements involving the 
violation, by the State and by individuals, of the right of 
each to the full and exclusive possession of the produce 
of his labour or services. 

(4) That social justice, therefore, cannot be achieved 
by further violations of the social and individual rights of 
the members of the State, but can be achieved solely by 
the abolition of existing violations of these rights. 

(5) That the principal infringement of the equal rights 
of the members of the State consists in the legislative 
creation of private monopolies, especially the monopoly of 
the land, and that all such monopolies would disappear if 
the State, abolishing all taxation, were to appropriate and 
use for social purposes the annual rental value of all natural 
monopolies, i.e. of monopolies arising from exclusive or 
special rights to land. 

(6) That the abolition of monopolies, destroying the 
power of monopolists, would also terminate the excessive 
power of the owners of competing capital over labour, and 
would enable every labourer to secure wages of equal 
value to that of the entire product of his labour. 

In support of these conclusions the following dis- 
tinctions, economic and ethical, were drawn between 
capital and all other forms of wealth, i.e. labour-products 
on the one part, and land in all its forms on the otJier part. 



CHAP. I INTRODUCTION 347 



Economic 

( 1 ) Labour-products are the result of individual exer- 
tion, performed singly or in co-operation with others. 

Land is not a product of human exertion, and the value 
of land arises, not from individual exertion, but from natural 
differences of productivity, made potent by social growth 
and necessities. 

(2) All labour-products are ephemeral, the sole purpose 
of their production being their consumption. 

Land exists for ever, and monopolies accumulate. 

(3) Social progress reducing the requisite exertion in 
the production of labour-products, consequent increase of 
production reduces their value. 

Social progress does not create any ability to produce 
land ; it merely increases the competition for land, and 
consequently adds to its value. 

As a result of the facts set forth in (2) and (3), the value 
of land, i.e. natural monopolies, largely exceeds the value 
of accumulated labour-products in every country. 

(4) Labour-products cannot arise without the use of 
land. 

Land does not arise from the use of labour-products. 

(5) Labour-products are not limited in the sense that 
their quantity cannot be increased. On the contrary, the 
more labour-products are consumed the more are produced. 

Land is limited. The more land any one person 
appropriates the less is available for appropriation by 
others. 

(6) Private ownership of labour-products, inclusive of 
capital, does not add to natural rent and interest. 

Private ownership of land does add spurious rent and 
interest, as well as profit, to natural rent and interest. 

(7) Taxes on labour-products, increasing their price, 
tend to reduce the consumption and production of labour- 
products and the employment of labour. 

Taxes on the value of land, reducing the monopoly 
and price of land, tend to increase production, the employ- 
ment of labour, and therefore consumption. 



348 DEMOCRACY VERSUS SOCIAUSM part v 



Ethical 

(i) Labour -products being the result of individual 
exertion, the right to their possession is unequal, i.e. 
dependent upon service rendered. 

Land not being the product of exertion, the value of 
land being the result of social growth and necessities, the 
right to the possession of land is equal, i.e. no one can have 
a better right to the possession of land than any other. 

(2) The value of labour-products is the measure of 
the service which their rightful owner has rendered to 
the community. 

The value of land is the measure of the service which 
the community is expected to render to the owners of 
land. 

(3) Private ownership of labour-products results from 
a natural right antecedent to any legislation. 

Private ownership of land originally arises from 
violence and fraud, subsequently sanctioned by legislation. 

(4) Private ownership of land involves the perpetual 
infringement of property rights ; it enables the owners to 
perpetually appropriate wealth made by others without 
rendering service in return. 

Private ownership of labour-products does not involve 
any infringement of property rights; it does not enable 
the owners to appropriate wealth in excess of the value of 
the services rendered by them. 



CHAPTER II 



OBJECTIONS TO PRINCIPLES 



The conclusions set forth in the preceding chapter, or 
several of them, have been, and are being, contested by 
socialist writers as well as by their opponents. The same 
objections being frequently urged by several authors, those 
have been selected for refutation here who claim notice, 
either by their representative character or by their power 
of argumentation. 

" If labour alone gave property, the landowners* case is 
much better on Mr. George's principles than he admits. 
Suppose by labour a piece of land was banked and enclosed 
from the sea — made, in short, not a part of the land 
' originally entailed on the puniest,' etc. — Mr. George must 
admit a right to it in the man whose labour made it. But 
what is the difference between the case put and land in 
general, except that in land in general there was, before 
labour was put on it, what has been called the * prairie 
value ' ? That is what, if anything, was * entailed on the 
puniest,' etc. Tax that, confiscate that, but not the stored 
labour which is on the land." ^ 

"It is important to notice that, though in common 
talk we separate the two (land and capitd), and though 
political economists have given a scientific dignity to this 
rough classification of the instruments of production, dis- 
tinguishing as ' land ' that which has been provided by 
* Nature,' and as * capital ' that which has been made by 
human industry, the distinction is not one which can be 

^ Lord Bramwell, Nationalisation of Land, p. 9. Published at the Central Office of 
** The Liberty and Property Defence League." 



350 DEMOCRACY VERSUS SOCIALISM part v 

clearly traced in dealing with the actual things which are 
the instruments of production, because most of these are 
compounded of the gifts of Nature and the results of 
human activity. . . . 

" The natural capabilities of land are increased, and, 
indeed, even called into existence, by the mere develop- 
ment of society. But, further, every foot of agricultural 
and mining land in England has been improved as an in- 
strument of production by the exercise of human labour. 

"First, of human labour not on that land itself; by 
the improvement of the general climate, through clearing 
of forest and draining of marsh ; by the making of canals, 
roads, railways, rendering every part of the country acces- 
sible ; by the growth of villages and towns!; by the im- 
provement of agricultural science ; and stiU more, by the 
development of manufactures and foreign commerce. Of 
all this human labour no man can say which part has made 
the value of his land, and none can prove his title to 
monopolise the value it has made. 

" Secondly, all our land has been improved by labour 
bestowed especially upon it. Indeed, the land itself, as 
an instrument of production, may be quite as truly said to 
be the work of man as the gift of Nature. Every farm 
or garden, every mine or quarry, is saturated with the 
effects of human labour. Capital is everywhere infused 
into and intermixed with land. Who distinguishes from 
the mine the plant by which it exists ? Who distinguishes 
from the farm the lanes, the hedges, the gates, the drains, 
the buildings, the farm-house ? Certainly not the English 
man of business, be he landlord, farmer, auctioneer, or 
income-tax commissioner. Only the bold bad economist 
attempts it, and, we must add, some few amongst our 
allies, the land-nationalisers. . . . 

" When we consider what is usually called capital we 
are as much at a loss to disentangle it from land as we are 
to find land which does not partake of the attributes of 
capital. 

"For though capital is conmionly defined as wealth 
produced by human labour, and is destined, not for the 
immediate satisfaction of human wants, but for transforma- 



CHAP. II OBJECTIONS TO PRINCIPLES 351 

tion into, or production of, the means of such satisfaction 
in the future, yet railways, docks, canals, mines, etc., which 
are classed as capital among the instruments of production, 
are really only somewhat elaborate modifications of land. 
The buildings and the plant with which they are worked 
are further removed from the form of land, but we lump 
the lot as capital. All farming improvements, all indus- 
trial buildings, all shops, all machinery, raw material, live 
and dead stock of every kind, are called capital. And just 
as there is a purely social element in the value of land, so 
there are purely social elements in the value of capital, and 
its value, in all its forms, depends upon its accessibility 
and fitness here and now, and not on the labour it has 
cost. The New River Company's Water shares have 
their present enormous value not because Sir Hugh 
Middleton's venture was costly, but because London has 
become great." ^ 

The " fine old crusted Tory," Lord Bramwell, writing 
on behalf of a body whose principal object is to maintain 
the existing system, thus agrees with the spokesman of the 
Fabian Society in asserting that no distinction can be drawn 
between capital, i.e. labour -products, and land. Lord 
Bramwell takes the case most favourable to his contention, 
" a piece of land banked and enclosed from the sea — made, 
in short," and triumphantly claims that if this piece of land 
rightfully is private property, all other land also may right- 
fully become private property. If the premise is true the 
conclusion is inevitable. But is it true } Lord Bramwell 
has treated it as an axiom ; has made no attempt to prove 
it. Yet a slight examination shows that it is erroneous, 
and reveals the origin of the error. Land in the sense of 
the dry surface of the globe — that is, in the restricted sense 
— is confounded with land in its wider sense, as including all 
the energies and matter of nature outside of man and not 
altered by his activity. The sea is land as much as an 
adjoining field. It is land covered with water. Human 
labour removes the water from the land and raises the 
level of the land, but it does not " make " the land. If 
thereby it creates a value, that value belongs to him who 

^ '' Fabian Tract," No. 7, Capital md Land, pp. 3, 4, and 7. 



352 DEMOCRACY VERSUS SOCIALISM party 

exercised the labour. The value of the improvement 
belongs to the improver, but not any value or the land, 
i.e. any value which may attach to the position in which he 
places his improvement. These two values are so easily 
separated that it is a widespread practice so to do. In 
Great Britain, where landlords are by law entitled to 
claim the foreshore on which their land abuts, rent is 
habitually paid by those who reclaim the foreshore. The 
landlord, not the improver, takes the land value. If the 
State, instead of the individual landlord, "confiscates" 
this value, it does exactly what Lord Bramwell demands. 
It abstains from confiscating " the stored labour on the 
land," and does confiscate the value, not due to stored 
labour, and which he erroneously terms " prairie value." 

The Fabian pamphleteer argues his objection more 
elaborately. His arguments, moreover, are of several 
kinds. One is that no distinction can be drawn between 
land and capital, because " most " forms of capital " are 
compounded of the gifts of Nature and the results of 
human activity." The term "compounded," however, 
is a very loose one. The only meaning which can attach 
to the sentence in which it occurs is, that most forms of 
capital consist of gifts of nature altered in place or form, 
or in both respects, by human activities. This is true, not 
merely of " most " but of all forms of capital and wealth. 
This fact, however, does not prevent any human being 
from apprehending the difference between a river and a 
cup of water ; between a clay-bed and a brick ; between 
a deposit of coal and a ton of coal at the pit's mouth ; 
between a deposit of ironstone and a locomotive. Though 
the cup of water, the brick, the ton of coal, and the loco- 
motive are " compounded of the gifts of nature and the 
results of human activity," they are, nevertheless, or rather 
on account of this compounding, easily distinguishable 
from the river, the clay-bed, and the deposit of coal and 
ironstone, from which they were separated by human 
labour. 

The second argument used is, that social activities, of 
which " no man can say which has made the value of his 
land," "have improved land as an instrument of pro- 



CHAP. II OBJECTIONS TO PRINCIPLES 353 

duction." This is true, and it is equally true that the 
result of these social activities cannot be distinguished from 
the value of land. Being the result, not of individual 
activities, but of social activities, they rightfully are 
common property and not individual property. They, 
therefore, must be regarded and have been regarded 
throughout this work, — as by all Land Nationalisers and 
Single Taxers, — as part and parcel of the value of land. 

It is, however, different with regard to those improve- 
ments effected by labour "specially bestowed upon the 
land," which, in his third argument, the pamphleteer alleges 
also to be indistinguishable from the land itself. Is it 
true that a building cannot be distinguished from the land 
on which it stands.^ Every building-lease proves the 
contrary. Is it true that the hedges, fences, gates, drains, 
and buildings on a farm cannot be distinguished from the 
land of the farm ? It is done every year in Queensland, 
South Australia, New South Wales, and New Zealand, as 
well as in other parts of the world, where improvements 
are exempted from taxation which falls upon the land alone. 
It is likewise done wherever the tenant's property in farm 
improvements effected by them is recognised by law or 
contract. Similarly, everyday experience proves that the 
capital of a mine, its shafts, drives, machinery, and build- 
ings, can be differentiated from the natural deposit, which, 
together with this capital, constitutes the mine. For when- 
ever a landlord charges royalty to a mining company, both 
of them draw this distinction, and the appropriation of the 
royalty by the State would nationalise the land of the mine 
without infringing upon the capital of the mine. 

The fourth argument is, that such capital as railways, 
docks, canals, mines, and the buildings and plants with 
which they are worked, as well as the New River Com- 
pany's Water Shares, though capital, cannot be " dis- 
entangled " from land. This statement, like the preceding 
ones, is the result of an insufficient analysis ; of the in- 
ability of socialists to separate monopoly from capital. The 
improvements which constitute the "road" — levelling, 
cuttings, bridges, ballast, sleepers, and rails, as well as the 
rolling stock, station buildings, repairing shops, adminis- 

2 A 



354 DEMOCRACY VERSUS SOCIALISM part v 

trative buildings, and any furniture and machinery therein — 
constitute the capital of a railway and have no analogy 
with land. The land on which the buildings stand, or on 
which the road is laid, as well as the exclusive privilege to 
the right-of-way over the continuous track, constitutes the 
land. The union of these two classes of things forms 
a railway. Yet there is not the slightest difficulty in 
separating the capital and its value from the land and its 
value. That the application of the same analytical principle 
to a mine yields the same result has been shown already. 
Nor is it necessary to do more than point out their applica- 
bility to docks, canals, the property of water companies 
and similar undertakings, the value of which consists 
partly — and in the New River Company almost entirely — 
of the value of special privileges in die use of natural 
media. 

The allegation that "the English man of business" 
does not distinguish between land and capital, if true, 
would be serious. For seeing that capital, being a labour- 
product, is ephemeral, while land is eternal, and legal 
privileges to the special use of land are not exposed to 
wear and tear, its truth would cast serious doubt on the 
intelligence of English business men. The allegation, 
however, is erroneous. Business men, English as well as 
foreign, are in the habit of capitalising incomes from land, 
or incomes arising mainly from the privileged use of land, 
at a higher rate, other things being equal, than incomes 
arising from the use of capital. Interest at the rate of 4 
per cent from railway shares is regarded as a good return ; 
but the same interest is considered exceedingly unsatisfactory 
when derived from shares in a cotton factory. Or to put 
it in another way : an income of ^ 1 000 from ground rents 
would be worth ^34,000 in the market, when a like 
income from any competitive industrial undertaking would 
be worth no more than ^20,000, and probably less. Men 
of business, therefore, do not deserve the reflection cast 
upon them. 

Finally, attention must be drawn to the crudeness of 
classification which applies the term " instrument of pro- 
duction " alike to a machine and to land. If socialists 



CHAP. II OBJECTIONS TO PRINCIPLES 355 

were to be more accurate in their classification, if they were 
to separate the means and instruments which men employ 
in production from the opportunities on which they are 
employed, many economic and ethical errors would be 
avoided. 

Another series of arguments, differing from those con- 
tained in the preceding extracts but coming from the same 
quarter, must now be examined. They are contained in 
the following extracts : — 

" They (Land Nationalisers) use the argument that 
capital, unlike land, is created by labour, and is therefore 
a proper subject of private ownership, while land is not. 
Socialists do not overlook the facts on which this argument 
rests, but they deny, on the grounds already partly stated, 
that any distinction can be founded on them sufficiently 
clear and important to justify the conclusion drawn. But, 
supposing we assume it true that land is not the product 
of labour and that capital is, it is not by any means true 
that the rent of land is not the product of labour and that 
the interest on capital is. Nor is it true, as Land 
Nationalisers frequently seem to assume, that capital 
necessarily becomes the property of those whose labour 
produces it ; whereas land is undeniably in many cases 
owned by persons who have got it in exchange for capital, 
which may, according to our premises, have been produced 
by their own labour. Now, since private ownership, 
whether of land or capital, simply means the right to draw 
and dispose of a revenue from the property, why should 
the landowner be forbidden to do that which is allowed to 
the capitalist, in a society in which land and capital are 
commercially equivalent ? Virgin soil, without labour 
upon or about it, can yield no revenue ; and all capital has 
been produced by labour working on land. The landlord 
receives the revenue which labour produces on his land in 
the form of food, clothing, books, pictures, yachts, race- 
horses, and command of industrial capital, in whatever 
proportions he thinks best. The ownership of land 
enables the landlord to take capital for nothing from the 
labourers as fast as their labour creates it, exactly as it 
enables him to squander idly other portions of its products 



356 DEMOCRACY VERSUS SOCIAUSM part v 

in the manner that so scandalises the land nationalisers. 
When his tenants improve their holdings by their own 
labour the landlord, on the expiration of the lease, re- 
morselessly appropriates the capital so created by raising 
the rent. In the case of poor tenants holding farms from 
year to year in Ireland, the incessant stealing of capital by 
this method so outraged the moral sense of the community 
that the Legislature interfered to prevent it long before 
land nationalisation was commonly talked of in this country. 
Yet land nationalisers seem to be prepared to treat as 
sacred the landlords' claim to private property in capital 
acquired by thefts of this kind, although they will not 
hear of their claim to property in land. Capital serves as 
an instrument for robbing in a precisely identical manner. 
In England industrial capital is mainly created by wage- 
workers who get nothing for it but permission to create in 
addition enough subsistence to keep each other alive in a 
poor way. Its immediate appropriation by idle proprietors 
and shareholders, whose economic relation to the workers 
is exactly the same in principle as that of the landlords, 
goes on every day under our eyes. The landlord com- 
pels the worker to convert his land into a railway, his 
ren into a drained level, his barren seaside waste into a 
fashionable watering-place, his mountain into a tunnel, his 
manor park into a suburb full of houses let on repairing 
leases ; and lo ! he has escaped the land nationalisers — his 
land is now become capital and is sacred. 

" The socialists admit that labour has contributed to 
capital and that labour gives some claim to ownership. 
The socialists, however, must contend that only an in- 
significant part of our capital is now in the hands of those 
by whom the labour has been performed, or even of their 
descendants. How it was taken from them none should 
know better than the Land Nationalisers." ^ 

The first allegation is, that even if capital were dis- 
tinguished from land as a fit subject of private ownership 
on account of its being the product of labour, " it is not 
by any means true that the rent of land is not the product 

^ Fabian Tract, No. 7, Capital and Land^ pp. 4, 5. Published by ** The Fabian 
Society." 



CHAP. II OBJECTIONS TO PRINCIPLES 357 

of labour, and that the interest on capital is ; " the tacit 
assumption being, that both interest and rent are the result 
of human labour, and that, therefore, no distinction can be 
drawn between them. In one sense, both interest and 
rent are the result of human labour, i.e. both reach the 
owner in the shape of labour-products. In another 
respect, however, they differ widely. Natural rent is not 
the product of individual labour but that of the superior 
opportunity on which labour is exercised.^ If it is admitted 
that all the members of a society are entitled to equal 
opportunities, it must also be admitted that rent is a 
common possession of all of them and cannot be rightfully 
reduced to private ownership. 

Interest, like rent, is no deduction from the product 
of individual labour ; but, unlike rent, is also no deduction 
from the product of common labour. It is the product 
of individual services rendered by the owners of capital.^ 
Interest, therefore, cannot rightfully be made common 
property, unless capital can rightfully be made common 
property. If, then, it is admitted, as, for the sake of 
argument it is admitted by this writer, that capital is not 
a proper subject of common ownership, it follows that 
interest also is not a proper subject of common ownership. 

The second argument is, that existing capital has not 
generally been produced by those who own it, while land 
has in some instances been acquired with capital produced 
by those who owned it, and the complaint is urged, that 
Land Nationalisers " seem to be prepared to treat as sacred 
the landlords' claim to private property in capital acquired 
by theft (legal theft), dthough they will not hear of their 
claim to property in land." 

Before replying to this argument and complaint, the 
question must be asked. What is the object of social reform ? 
Is it to redress injustice committed in the past, or is it to 
prevent injustice being committed now and in the future.? 
The former is impossible. Who can say which parts of 
the capital now existing were rightfully acquired by their 
owners and which were not ? Even if the capital wrong- 
fully acquired by present owners could be separated from 

^ See Part II. chap. viii. ' See Part II. chapt. ix. and x. 



358 DEMOCRACY VERSUS SOCIALISM party 

that rightfully acquired, who knows the legitimate claim- 
ants and can restore it to them ? Obviously, these diffi- 
culties are insoluble. Moreover, if the private appropriation 
of land were an injustice, which, committed by men now 
dead, affected none but their dispossessed contemporaries 
equally dead, on what plea could the private ownership of 
land be condemned now ? Inflicting no present or future 
injustice, and the removal of past injustice being impossible, 
no valid claim to the dispossession of present owners could 
be advanced. 

The only possible object of social reform, therefore, 
is the prevention of present and future injustice. The 
question whether some or most of the existing capital has 
been wrongfully acquired, therefore, does not concern us. 
Present capital will have disappeared in a few years. What 
is of importance is to prevent the wrongful acquisition of 
capital now being made or which will be made in the 
future. That this writer knows that private ownership of 
land alone gives to its owners the power to wrongfully 
acquire capital ; that he also knows that the abolition of 
such private ownership would prevent capital being wrong- 
fully taken from those who make it now, or will make it 
in the future, seems to be shown by the two concluding 
sentences of the foregoing quotation : — 

" The socialists, however, must contend that only an 
insignificant part of our capital is now in the hands of 
those by whom the labour has been performed, or even of 
their descendants. How it was taken from them, none 
should know better than the Land Nationalisers." 

It is the same with the claim that some land has been 
acquired by present owners with wealth produced by them. 
Men are entitled to the produce of their labour, but not 
necessarily to that which existing injustice enables them 
to obtain in exchange for the produce of their labour. A 
slave is no less entitled to his freedom when he has been 
sold than when he is in the hands of the original captor. 
Private ownership of land and monopolies being an in- 
fringement of the equal rights of all, conferring upon their 
owners the legal right to appropriate the wealth belonging 
to others, the question how men came to be owners of 



CHAP. II OBJECTIONS TO PRINCIPLES 359 

them cannot affect the right of all others. Even if the 
government of a country has sold land and monopolies 
against wealth produced by the purchasers, the right of all 
others to the wealth which they produce remains intact. 
As this right is violated as long as private ownership in 
land and monopolies is recognised, private ownership, even 
under these circumstances, is a wrong, and must therefore 
be abolished. 

A pamphlet. Property in Land^ professes to show : 
Firstly, that the owning of land is justifiable on exactly 
the same grounds as the owning of any other material 
object ; and, secondly, that land or any other thing, may 
be owned by some without transgressing the equal rights 
of others. The pamphlet is too elaborate to permit of the 
quotation of such parts of the arguments used as are not 
disputed. These, therefore, will be reproduced in sum- 
marised form. 

Labour can produce nothing. It can only alter the 
form or place of matter. " That land is not the pro- 
duce of labour affords no grounds for placing property 
in land on a different footing from property in other 
things." 

" There is no form of wealth natural or artificial that 
is not strictly limited. The number of gold coins and 
the quantity of bullion ... of pig-iron, lead, copper, 
etc., in the world is limited ; and instead of these things 
being producible in infinite quantities, the quantities are 
so definite that a very small change in the supply or 
demand for any of them is sufficient to cause great fluc- 
tuations in price. Not only is it a fact that every kind 
of wealth is limited in quantity, it is also the fact that it 
would not be wealth unless it were so limited." . . . 
Therefore, " land does not diflFer from, but agrees with, 
all other kinds of property in being limited." 

" The assumption that land is the common inheritance 
of mankind, as a generality, looks quite axiomatic ; but 
when we reduce it to a particular case, we reduce it to an 
absurdity. The assumption is, that each of my readers 
and all the inhabitants of Timbuctoo are part proprietors 
of the land of Ottawa, and that no one can take possession 



36o DEMOCRACY VERSUS SOCIAUSM part v 

of an acre there^ without usurping our rights > Land being 
made by no man, any one who takes possession of un- 
occupied land does harm to no one. After the land has 
been cleared, enclosed, and cultivated, the claims of fresh 
emigrants to a share in it, would lead to perpetual fighting. 
. \ . The basis of property is not the securing to each of 
the produce of his labour, for labour produces nothing, 
but the acknowledgment of the priority of claim, which is 
the only way to avoid continual strife." 

Dealing at length with arguments advanced by Herbert 
Spencer in Justice^ the following summary of the objections 
to the same is given : — 

" The arguments given above may be summed up as 
follows : — The theory' that land ought not to be private 
property rests solely on the assumption that the natural 
media are common property, in the sense that they belong 
equally to all men — an assumption which looks so rational 
that it has been accepted and endorsed by most of the 
great writers for centuries past, yet it will not stand 
criticism. The first corollary from the so-called axiom, 
that all natural objects are the common heritage of man- 
kind, is that, as no one ought to use the property of 
others so as to destroy it, therefore, no one ought to use 
any natural object as fuel or as food, or in any other way 
that destroys it. If this reductio ad absurdum can be 
explained away the next corollary is that, as all material 
objects form part of the common heritage, the title to 
private property must be in all cases not merely imperfect, 
but absolutely bad. Again, if we accept the dictum that 
no one ought to appropriate any natural object unless 
there is enough, and as good, left for everybody else, then 
nothing would ever be appropriated." ^ 

The first argument advanced by Mr. Spence is, that 
as labour cannot create anything out of nothing, labour- 
products are not " made " by labour, and therefore stand 
in this respect on an equality with land. The obvious 
reply to this contention is, that while land would exist in 

^ The italics are mine. 

' J. C. Spence, Property in Landy published at the central office of The Liberty and 
Property Defence League. 



CHAP. II OBJECTIONS TO PRINCIPLES 361 

the absence of man, labour-products would have no exist- 
ence in man's absence. Likewise, all land would continue 
to exist if men were foolish enough not to use their 
energies productively ; but labour-products would quickly 
disappear. Labour-products are, therefore, differentiated 
from land by human exertion. The manner in which they 
are differentiated does not affect the question. 

The contention that all kinds of labour-products are 
limited as land is limited is even more preposterous. 
Labour-products are limited only by two conditions, land 
and labour. The material of labour-products becomes 
accessible through land, as the dry surface of the globe ; 
labour separates them from land. Labour, that is the 
number of human beings and their efficiency in produc- 
tion, is a constantly increasing quantity, and, so far, no 
limit has been discovered to the material of labour-products. 
Labour- products, therefore, are unlimited in the sense 
that man has not yet discovered, if he ever will discover, 
the limit to their production. 

Land, even in this same sense, that of the dry surface 
of the globe, however, is limited. Only here or there can 
man add to it, by converting a small area of swamp, lake, 
or sea into dry land, and these additions are unimportant 
and themselves strictly limited. Nor does the area of 
land grow in other ways. The more land is appropriated 
by one man, the less land is available for appropriation by 
others. Hence the area of land is limited, while the 
quantity of producible labour-products is, as far as man 
can see, unlimited. 

The third and fourth contentions are, that, if land is 
the common inheritance of mankind, the inhabitants of 
Timbuctoo and of all other countries are part proprietors 
of the land of Ottawa, and that " no one can take 
possession of an acre there without usurping the rights 
of" all others. 

The same contention is urged in a more incisive 
manner by Wm. E. H. Lecky : — 

" If the land of the world is the inalienable possession 
of the whole human race, no nation has any right to claim 
one portion of it to the exclusion of the rest. The French 



362 DEMOCRACY VERSUS SOCIALISM part v 

have no more right to the soil of France than the Germans. 
Inequalities of fortune are scarcely less among nations 
than among individuals, and they must be equally unjust. 
. . . And what possible right, on the principle of Mr. 
George, have the younger nations to claim for themselves 
the exclusive possession of vast tracts of fertile and almost 
uninhabited land, as against the teeming millions of the 
overcrowded centres otthe old world V^ 

Admitting that all men, without distinction of race or 
colour, have equal rights to all the earth, it by no means 
follows that none of them may take possession of any 
part of it ; what does follow is, that no one of them may 
take more than his equal share of land, without com- 
pensating all others for the special privilege which he 
assumes. 

All men being equally entitled to the use of land ; 
man being unable to live without using land ; man being 
also unable to live in society without regulations regarding 
the use of land — it becomes the duty of every social body 
to frame such regulations as will ensure the equal rights of 
all its members to the use of land. If all mankind formed 
one social body, the contention would be true, that this 
social body must frame regulations safeguarding the equal 
rights of all men to the use of the whole earth. As long, 
however, as men are associated in several and distinct 
social bodies, justice is satisfied, if each of these social 
bodies frames regulations safeguarding the equal rights of 
all its members to all the land which each of these social 
bodies controls. As between the members of each social 
body, justice requires such regulations to be framed, 
whether they are or are not equally framed by other 
social bodies. 

It might, however, be contended that, on the principle 
of equal rights to land, no social body is justified in 
appropriating the rent of land for purposes beneficial to 
its own members alone ; that the rent of all countries 
belongs equally to all mankind. If nations excluded the 
members of all other nations from citizenship this con- 
tention might be of some value. Seeing, however, that 

^ Wm. E. H. Lecky, Dtmocracy and Liberty y vol. ii. pp. 293, 294. 



CHAP. II OBJECTIONS TO PRINCIPLES 363 

the rent of land is the only fund from which governmental 
expenditure can be met without injustice; that such 
expenditure, equitably made, confers equal benefits on 
all citizens ; the admission to citizenship of the members 
of other nations confers upon all who claim citizenship an 
equal share in the rent of land. 

This also is the answer to Mr. Lecky's contention that 
the younger nations of the world have no right, as against 
the teeming millions of the old world, to the exclusive 
possession of vast tracts of almost uninhabited land. 
These young nations prefer no claim to such exclusive 
possession, in the only sense in which the term can be 
legitimately used here, i.e. that they deprive the members 
of older nations of the use of such land. Unable, even 
if they were willing, to bring the land which they control 
to the inhabitants of the older world, they have no 
objection to the latter coming to that land ; nay, are 
anxious for them to do so. When, therefore, they have 
appropriated rent for common purposes they will have 
recognised the equal right of all men to their land. 

It is true, some of these younger nations exclude or 
limit the admission of one or another inferior race, and in 
so far infringe this principle of equal right. This exclusion, 
largely due to causes and sentiments which originate in 
the one-sided competition arising under the existing 
system, would disappear with it. It, however, rests to 
some extent also on the perception that the admission of 
such inferior races must tend to reduce the adaptation to 
social life of future generations. How far this is true and 
whether, if true, it would justify the exclusion of inferior 
races are questions outside the present discussion. 

The fifth contention is, that priority of claim, and not 
the securing to each the product of his labour, is the basis 
of property, because in this way alone can perpetual fight- 
ing be avoided. The question arises at once, priority of 
claim to what } To the whole earth, to a continent, to a 
province, or to how much less of the earth's surface ?. It 
might be said that it can be left to each society to regulate 
the extent to which it will admit any one's priority of 
claim. That, however, is no answer to the question to 



364 DEMOCRACY VERSUS SOCIAUSM part v 

what extent ethics enforce the recognition of priority of 
claim. 

Nor is it possible to answer this question, for ethics 
cannot recognise priority of claim as a basis of property. 
Even if, between two contemporaries, priority of claim 
could confer a valid title, their action or non-action cannot 
affect the rights of succeeding generations. A child cannot 
be held to have lost its natural rights because its father 
failed to claim his own. Otherwise men might be right- 
fully refused their freedom because their remote forefathers 
had sold themselves into slavery or because they had failed 
to claim their freedom. 

The last contention, similarly directed to prove that 
land can rightfully be converted into private property, 
consists of the assertion that three corollaries drawn from 
the doctrine that natural media are common property, 
establish its absurdity. 

The first and third corollary are practically identical, 
the first including the last. It is, that "as no one ought 
to use the property of others so as to destroy it, therefore 
no one ought to use any natural object as fuel or as food, 
or in any other way that destroys it." 

As no one can use any natural media continuously 
without destroying them, in the only sense in which men 
can destroy anything, i,e. lessening or destroying their 
usefulness to mankind, the prohibition includes all natural 
media. Ex hypothesis all men possess equal rights to the 
use of all natural media. Therefore, it cannot be a true 
corollary from this doctrine that none has any right to 
the use of any natural media. On the other hand, it is 
clear, the equaJ right of all is maintained, if none of them 
takes more from the common stock than any of the others 
can withdraw therefrom. Likewise, if any one of them 
takes more from the common stock than each of all the 
others can take, and fully compensates all the others for 
the greater privilege assumed by him, the equal right of 
all to natural media is fully maintained. Not non-use of 
natural media, but equality of use or compensation for 
unequal use, is the logical corollary of the doctrine of 
equal right to the use of natural media. 



CHAP. II OBJECTIONS TO PRINCIPLES 365 

The second corollary drawn by Mr. Spence is, that 
" if all natural objects form part of the common heritage, 
the title to private property must be, in all cases, not 
merely imperfect, but absolutely bad." 

This contention is true, in so far as all title to private 
property is bad, as long as the equal right of all to the use 
of natural media is infringed upon. But if this equal 
right is recognised, the title to private property in labour- 
products is rendered perfect. For these reasons : — 

All men having equal rights to the use of all natural 
media, each of them has full right to the use of natural 
media not desired by others. If more than one desire to 
use any, each is entitled to an equal use of them with 
these others. If they allot the use of them to one 
amongst them, the others are entitled to compensation for 
the relinquishment of their equal right. 

All natural media become accessible to man through 
land. Where land is valueless, no man or only one man 
desires the use of the natural media to which it gives 
access. Land obtains a value when more than one desires 
its possession. If its use is allotted to one of them, the 
other or others must use land giving access to less desirable 
natural media. The value of any piece of land, i.e. its rental 
value, therefore, measures the advantage in the use of 
natural media which it affords to the possessor over that 
which can be derived from the use of land having no value 
and open to all. Hence, if the rent of all valuable land is 
paid into a common fund from which all may withdraw 
equal shares, directly or indirectly, the equal right of all 
to the use of all natural media is maintained. Those who 
have withdrawn less from the common stock than others, 
have participated equally with these others in the resulting 
advantage. Equality of right to the common possession 
being thus maintained, each is fully entitled to the separate 
possession not only of the natural media thus withdrawn 
from the common stock, but also to any additional value, 
however great, which his labour creates therein. 

When, however, the equal right of all men to the use 
of all natural media is disregarded ; when some withdraw 
more from the common stock than others, without making 



366 DEMOCRACY VERSUS SOCIAUSM part v 

compensation to these others, the title to private property 
in labour-products is imperfect, because the title to the 
material composing them is bad. 

Finally, there must be considered the arguments 
advanced by the late Professor Huxley against the theory 
of natural rights generally and that of the equal right to 
land specially. Siet forth at great length, they are never- 
theless fully stated in the following extracts '} — 

Endeavouring to refute equal natural rights in the 
social state, he takes the case of two men, sole inhabitants 
of an island, stalking the same goat to which each of them 
has a full natural right, and states : * — 

" If each insisted upon exerting his full natural rights, 
it is clear that there is nothing for it but to fight for the 
goat. . . . On the other hand, if the two men followed 
the dictates of the commonest common sense not less than 
those of natural sympathy, they would at once agree to 
unite in peaceful co-operation with each other, and that 
would be possible only if each agreed to limit the exercise 
of his natural rights so far as they might involve any more 
damage to the other than to himself. That is to say, the 
two men would in reality renounce the law of nature and 
put themselves under a moral and civil law, replacing 
natural rights which have no wrongs for moral and civil 
rights, each of which has its correlative wrong." 

It seems obvious that Professor Huxley did not fully 
consider the problem. He fixed his attention upon the 
maintenance of the natural rights of one of these two men, 
whereas the problem before him was, how to maintain the 
equal natural rights of both of them to the goat. For if 
they " fight for the goat " and the stronger of them takes 
it, the equal right of the other is clearly infringed upon. 
The maintenance of the equal natural right of each of 
them to the goat requires, therefore, just such an arrange- 
ment as Professor Huxley describes under the term 
" moral and civil right." The equal division of the goat 
between these men, for instance, far from being a 
"renunciation of the law of nature," would be the 

^ Professor T. H. Huxley, *' Natural Rights," Ntneuenth Century, February 1890. 

a Ibid. p. 182. 



CHAP. II OBJECTIONS TO PRINCIPLES 367 

method adopted to give fullest recognition to the law of 
nature. 

In addition to this imperfect and, therefore, misleading 
recognition of the problem, there is confusion of thought. 
Moral right is contrasted with natural right. Yet if the 
social state is natural to man ; if moral law is the law 
obedience to which furthers and disobedience to which 
hinders life in the social state ; then obviously moral law 
is the natural law of man in the social state, and moral 
rights and natural rights are identical. 

Equally misleading is the use of the terms "moral 
rights" and "civil rights" as denoting identical things. 
If civil rights are necessarily moral rights, no unjust custom 
or law has ever existed or ever can exist. If every moral 
right has always been recognised as a civil right there is 
no such thing as growth in social morality. Society has 
then been as moral at its beginning as it is to-day and ever 
will be, and our laws and customs are morally identical 
with those of the most degraded cannibals. 

Apart from this absurdity, Huxley's moral rights are 
evidently nothing else but natural rights under social 
conditions ; and further, admitting that the moral law 
enforces equality of rights — " no more damage to the 
other than to himself" — he thereby condemns as immoral 
inequality of rights. Yet this admission is made in the 
course of an argument in favour of the exclusive right of 
some to the earth. 

Professor Huxley's second endeavour is to show the 
erroneous nature of the contention that, labour being the 
only basis of property-rights, private property in labour- 
products can coexist with equal rights to land. In support 
of this view he states : ^ — 

" By parity of reasoning it would seem that I might 
say to a chronometer maker : * The gold and the iron in 
this timepiece, and, in fact, all the substances of which it 
is constructed, are parts of the material universe, therefore, 
the property of mankind at large. It is very true that 
your skill and labour have made a wonderful piece of 
mechanism out of them, but these are only improvements. 

1 "Natural Rights,*' Nineteenth Century^ February 1890, p. 191. 



368 DEMOCRACY VERSUS SOCIALISM part v 

Now you are quite entitled to claim the improvements, 
but you have no right to the gold and the iron, these 
belong to mankind.' " 

The error in this argument is so obvious that it ought 
not to have remained undetected by a much lesser man 
than Professor Huxley. It is the same confusion between 
common and equal rights previously exposed. Men have 
equal rights to land, because they are equally dependent 
upon the use of land for the maintenance of their lives. 
Their equal right does not, therefore, as does a common 
right, prohibit the use of the land by any one of them with- 
out the consent of all others. On the contrary, each of them 
is free to use the land without permission from any one, 
provided he infringes not the equal rights of all others. 
If, then, a man uses the land for the purpose of extracting 
gold and iron from the same, he has as much right so to 
use it as in any other way. The gold and the iron so 
extracted by his labour become his exclusive property, 
provided that by extracting them he has not infringed the 
equal right of all others to the use of land, i.e. that he does 
not use land for this purpose which gives him advantages 
greater than all others can obtain from the use of other 
land. If he uses land which gives him such advantages, 
his title to the gold and silver is vitiated till he has com- 
pensated all others for this infringement of their equal 
rights, i.e. till he has restored equalness. Provided he has 
done so, the chronometer maker's exclusive right of 
property in the gold and iron is not only compatible with 
the equal right of all men to the " material universe," but 
is a necessary consequence of such equal right. 

It may be contended that the recognition of exclusive 
property in a " part of the material universe," i.e. gold and 
iron, admits the possibility of exclusive property in all 
parts, i.e. the whole of the material universe. This con- 
tention, however, overlooks the essential difference between 
the ownership of labour-products, composed as they must 
be of matter, and the ownership of the material universe, 
the land. The difference may best be illustrated by con- 
trasting exclusive property in a fish taken from the ocean, 
and exclusive property in the ocean itself. The one does 



CHAP. 11 OBJECTIONS TO PRINCIPLES 369 

not infringe equal rights. All others may equally take 
fish from the ocean. The other does infringe equal 
rights ; no one but the owner may take fish out of the 
ocean. If any one does, the fish rightfully belongs to the 
owner, not to him. Property-rights in land, therefore, 
instead of being identical with property-rights in matter 
separated from the land, deny such property-rights to all 
but the owners of land. 

Lastly, Professor Huxley sets himself to prove that 
if labour is the basis of exclusive rights of property, land 
must be subject to exclusive property. As follows : — ^ 

" In a state of nature, I doubt if ten square miles of 
the surface of the chalk -downs of Sussex would yield 
pickings enough to keep one savage for a year. But 
thanks to the human labour bestowed upon it, the same 
area actually yields, one way or another, to the agricul- 
turist the means of supporting many men. If labour is 
the foundation of the claim to several property, on what 
pretext can the land, in this case also, be put upon a diflFerent 
footing from the steel pen ? " 

The arguments previously used — the distinction drawn 
between property-rights in the source of all matter, the 
material universe, and property-rights in matter separated 
from this source — evidently apply to this contention as 
well. For labour spent on land cannot add to the desir- 
able matter contained in it ; it can only make such matter 
more accessible. Clearing, fencing, draining, the erection 
of farm - buildings, and similar improvements are made 
for the purpose of giving easier access to the elements of 
fertility in the soil ; as mining improvements are made 
to give easier access to minerals below the soil. In either 
case, the object in view is the withdrawal of desirable 
matter from the land. Even manures are frequently 
applied for the purpose of freeing otherwise insoluble 
ingredients of the soil ; and in other cases are added in 
order to restore elements previously extracted, and to be 
themselves again extracted almost at once. 

The labourer is entitled to exclusive property in the 

^ "Natural Political Rights," Nimtienth Cmtury, February 1890, p. 192; Method 
and Results (Esiaya, voU i,), p. 374. 

2 B 



370 DEMOCRACY VERSUS SOCIAUSM part v 

additional accessibility due to his past labour, as he is 
entitled to exclusive property in all the matter which, owing 
to this greater accessibility, he separates from the land by 
present labour. But he cannot be entitled, by virtue of his 
labour, to exclusive property in the source of the desirable 
matter, the land itself, for the reason that his labour did 
not and cannot add to it. 

Moreover, it may well be questioned whether the 
additional productivity of the Sussex land, which Professor 
Huxley posits, is all due to previous labour bestowed upon 
the land. For if a savage were placed upon this land in 
its present state, he, having no knowledge of agriculture, 
might derive from it no more and probably less susten- 
ance than if it were still in a state of nature. The greater 
part of the additional productivity of the agriculturist's 
labour on this land is due, not to labour previously 
applied to it, but to advances in the knowledge of present 
labourers, and to the social environment which furnishes 
them the means of applying this knowledge. 

Nevertheless is it true that all the productivity of this 
land, due to present and previous labour exercised upon it, 
whether it is little or much, is rightfully private and exclu- 
sive property. And it follows from the hypothesis that 
all that productivity which is not due to labour exercised 
upon it, i.e. to improvements, cannot rightfully be private 
and exclusive property. 

Suppose this land, in its present state, instead of being 
situated a few miles from London, were situated five 
hundred miles from any centre of population. Would 
its productivity, the wealth which it yields to labour, be 
as great as it is in its present situation ? Evidently not ; 
its productivity would be less. Its favourable situation, 
therefore, forms part of its productivity. Labour exer- 
cised upon this land did not create this favourable situa- 
tion, cannot, therefore, give any right to private and 
exclusive property in the productivity hence arising. 

Suppose, again, land situated as favourably, and on 
which equal labour has been expended, but endowed with 
less natural fertility. Such land also would possess less 
productivity. Some part of the present productivity of 



CHAP. II OBJECTIONS TO PRINCIPLES 371 

Sussex land, therefore, may be due, not to previous labour, 
nor to situation, but to its greater natural fertility than 
other land which must be used. This part of its produc- 
tivity, like that arising from more favourable situation, 
therefore, also cannot rightfully become private and ex- 
clusive property. 

Whichever way, therefore, the question is looked at, 
labour expended in improvements on land, while giving 
exclusive property in such improvements, cannot give 
private and exclusive property-rights in the land itself. 



CHAPTER III 



THE METHOD OF REFORM 



The main propositions, previously established and vindi- 
cated in the last chapter, are : — 

All men have equal rights to the use of land, and 
each of them is entitled to the exclusive possession of all 
the wealth which his labour produces or his services pro- 
cure, provided he infringes not the equal rights of all 
others. Disregard of the equal right to land necessarily 
involves violations of the unequal right to wealth. Social 
injustice in the production and distribution of wealth thus 
arises from the disregard of the equal rights of all men to 
the use of the earth. Hence social justice cannot be 
achieved till, through the recognition of the equal rights 
of all to the use of land, each of them is made free to 
produce as much wealth as his capacity and industry 
enable him ; and till, through the abolition of all private 
monopolies and of the taxation of justly acquired wealth, 
each is secured in the exclusive possession of all the wealth 
which his labour produces or his services procure through 
free contract with its producers. 

And further : All men and women being members 
of a social body, the sole object for which a social body 
exists being to secure the greatest aggregate sum of happi- 
ness to its members ; such happiness being unattainable 
except through the establishment and maintenance of 
justice— justice demanding the recognition of the equal 
rights of all to the use of land, and the individual right of 
each to the produce of his labour ; it is the paramoimt 
duty of every social body to frame and enforce regula- 



CHAP. Ill THE METHOD OF REFORM 373 

tions which will safeguard these rights for every one of its 
members. 

That the land of civilised nations is now owned by 
some to the exclusion of others ; that consequently the 
equal rights of the majority of the members of every 
State are violated, cannot affect this duty. Were men 
now for the first time confronted with the question how 
land shall be dealt with ; were a body of men now to 
discover an uninhabited and fertile island ; the rights of 
each of them would be no greater and no less than the 
rights of those who live in countries where all the land is 
held as private property. For violation of rights does 
not abolish or even lessen rights. All the difference which 
can be claimed is, that the establishment of justice could 
inflict no hardship in the former cases ; while in the latter 
case it might inflict hardship upon some of the persons 
who profit and have profited by existing injustice. On the 
other hand, however, it must not be forgotten that the 
continuance of private ownership of land and con- 
sequential injustice, inflicts hardship, and inevitably much 
greater hardship, not only once but perpetually, upon 
those far more numerous persons who are injured by it. 
All that can be claimed on behalf of those who profit by 
social injustice, therefore, is, that the injustice shall be 
removed in a manner, which, while inflicting no avoidable 
hardship upon them, shall not needlessly prolong or 
aggravate the hardship of the victims of social injustice. 
Hence the substitution of the equal rights of all for the 
unequal rights of some to the land, having as its aim the 
greatest production and the just distribution of wealth, 
must be effected in a manner which will avoid all unneces- 
sary hardship to both classes. 

Other conditions must be observed. A sudden intro- 
duction of great and far-reaching social changes, however 
just, not only inflicts the maximum of temporary hardship 
on the whole people ; not only generates new evils more or 
less lasting, but places the change on insecure foundations. 
The hardships and evils unnecessarily provoked cause a re- 
vulsion of feeling, and may result in reaction, restoring con- 
ditions analogous to those which it was intended to remove. 



374 DEMOCRACY VERSUS SOCIALISM partv 

Moreover, it may well be questioned whether the masses 
of the people are as yet fit to live under conditions ot 
absolute social justice. The industrial warfare between 
employers and employed would inevitably be aggravated 
by any sudden and radical alteration in the relative power 
of the combatants. The workers largely made inde- 
pendent of capitalistic employment, lacking the experi- 
ence and moral development necessary for the co-operative 
conduct of industries, would misuse their newly acquired 
power, as power has been misused by the capitalistic classes. 
When, however, by slow increments of justice, general 
conditions are improved gradually, there will take place 
such a gradual moral growth, as will ultimately enable men 
to live under conditions of absolute justice. For all these 
reasons the sudden transformation of unequal into equal 
rights to land must, if possible, be avoided. 

The essential condition for the most productive use of 
land is security of possession of the land, and of all im- 
provements effected on the land. The absence of such 
security, where, as in the United Kingdom, land is mainly 
used by tenants ; or where, as in most other countries, 
the nominal owner is heavily indebted to a mortgagee, is a 
main cause of the inferior and inefficient use of land. The 
contemplated reform, therefore, must be effected in a 
manner which will give to the users permanency of posses- 
sion in the land and assurance of full compensation for 
improvements on their relinquishing such possession. 

With the same object in view, the most productive 
use of land, there must be avoided aU interference with 
individual control over the use of land. No State official 
must be allowed to dictate to the possessor of land in 
which manner and for what purposes the land must be 
used. On the other hand, the reform must be effected in 
such manner that the self-interest of every holder of land 
compels him to place it to the most profitable use. 

Leaving ethical considerations mainly to be dealt with 
in the succeeding chapters, the present one will be de- 
voted to the comparison of the several, theoretically 
possible, methods of reform, with regard to their economic 
and political advantages and disadvantages. 



CHAP. Ill THE METHOD OF REFORM 375 

One such theoretically possible method is the purchase 
of the land by the State. Its necessary consequences would 
be : purchase of all improvements where the selling owner 
did not desire to lease the land from the State, and leasing 
the land, either in perpetuity, with regularly recurring 
adjustments of rent and sale of improvements, or for short 
periods at a fixed rental, including interest for improve- 
ments. 

As no government is possessed of the necessary wealth, 
the purchase would have to be made with interest-bearing 
bonds. The interest charge thus created would, however, 
enormously exceed the rent and interest which the State, 
for many years, could receive for the land and improve- 
ments. For these reasons — 

It has already been shown ^ that, in addition to natural 
rent, there arises under private ownership a spurious rent, 
the result of the non-use or partial use of land. This 
spurious rent not only adds to the capital value of the 
unused or partially used land, but also to the value of all 
the land fully used, and in addition confers a value on 
some land which is not required for present use. Apart 
from this great and fictitious increase in the value of land 
thus arising, there is engendered an additional and specu- 
lative value of some land. 

Wherever exists even a remote possibility of land 
increasing in value in the future, land bears a price in 
excess of the capitalisation of its present rental value. 
The anticipated future increase in rental value is discoimted 
in advance. This additional and speculative value increases 
with every increase in the probability of the future advance 
of rental value. The action of this force, though not 
confined to this limit, may most clearly be discerned in the 
neighbourhood of growing towns and cities. Surrounding 
land used for grazing or agriculture, or not used, is bought 
and sold at prices which many times exceed its value as 
grazing or agricultural land. Though both sellers and 
purchasers know that all this land cannot be required for 
building purposes for perhaps a century to come, yet each 
of them buys and sells, on the possibility or probability of a 

^ Part II. chap. viii. 



376 DEMOCRACY VERSUS SOCIAUSM party 

particular piece of land being so required in the near 
future. 

These causes of artificial values, existing everywhere, 
are most active in quickly progressive countries. In the 
United States, Australia, South Africa, and other new 
countries, the areas of valuable land unused, or only partly 
used, are very large. Speculation in land is also generally 
active, and from both these causes the artificial value 
adhering to land is very great. 

As soon, however, as the Government would have pur- 
chased the land all this artificial value would disappear. 
The land not needed by the people would pay no rent ; 
the rent paid for other land would be far less than the 
expectation on which its capital value rested. The rent 
would, therefore, fall far below the interest charge on the 
purchase value of the land. To the loss so incurred must 
be added a loss on the purchase of improvements. Im- 
provements may be antiquated and much the worse for 
wear and tear and yet fully serve the purpose of the owner 
in inferior uses of land. Others may be serviceable for 
some purposes and unserviceable for others. When the 
land is taken from owners who refuse to continue pos- 
session on lease all the improvements on such land will 
have to be purchased at full value. New lessees, however, 
may, and generally will, prefer new improvements, and may 
also want to use the land for purposes for which existing 
improvements are of little or no value. In either case the 
State would receive little or nothing for improvements 
purchased at high value. This loss must be added to the 
loss on land values. 

The deficit thus arising would be enormous, might 
even equal one-half the interest payable to dispossessed 
landowners. There is only one way in which the revenue 
necessary to provide for it could be raised, viz. by taxation 
— either taxes on incomes or taxes on labour -products 
through customs and excise. Already, in most countries, 
the income-tax, yielding a comparatively small revenue, is 
nevertheless reducing the wealth-producing power of the 
people. While in some countries a small additional re- 
venue may be derived from this source, its revenue-yielding 



CHAP. Ill THE METHOD OF REFORM 377 

limit has been reached in others. The principal part of 
the additional burden would everywhere fall on labour- 
products through customs and excise taxation. Even ir 
taxes on imported goods were counterbalanced by equi- 
valent taxes on locally-produced goods, so as to prevent 
the creation of more private monopolies, the revenue which 
the State would derive from this source would fall far short 
of the sums which the masses of the people would have to 
pay. For manufacturers, importers, and dealers are com- 
pelled to add the tax to the cost price of their goods, and, 
making the average profit on their cost, must make such 
profits on the tax as well. 

Even if it were possible to raise the requisite and huge 
amounts from this source, which may well be doubted, 
there would arise an aggravation of existing injustice — the 
State would appropriate more of the products of individual 
exertion. Moreover, such taxation falls mainly on the 
poorer classes of the people ; these, instead of being re- 
lieved, would therefore be still further injured by the State 
purchase of the land. 

The classes so injured comprise not only the bulk ot 
the landless men, but the great majority of landowners 
themselves, the owners of small areas of agricultural land 
and of cheap building sites in villages, towns, and cities. 
The additional taxation would generally take from them 
more than the interest on the bonds received by them 
could amount to. Their land, therefore, would not 
be purchased, it would be confiscated, and in addition 
they would have to provide part of the interest pay- 
able to the owners of larger areas and of more valuable 
land. 

The entire object of the reform, therefore, would be 
missed by this method even if it were practicable. Pro- 
duction would be hindered by additional taxation as much 
as it would be fostered by the establishment of equal rights 
to land, and the new taxation added to existing ones would 
immensely aggravate the existing violation of individual 
rights. Instead of unnecessary hardship being avoided, 
the utmost hardship would be inflicted upon the victims 
of existing injustice. Perpetuated under another name — 



378 DEMOCRACY VERSUS SOCIALISM part v 

interest instead of rent — injustice would be aggravated 
instead of being removed. 

New evils also would arise. After the Government 
had acquired the land it would have to fix the rental of all 
land, and would have to select the persons to whom leases 
are to be granted for land relinquished by previous owners, 
as well as to determine the area leased to any one, and in 
many cases its use. If perpetual leasing at variable rents 
were the system adopted, this interference would take place 
once ; if terminable leases at fixed rents were adopted, it 
would have to take place at perpetually recurring intervals. 
Two systems are possible. Government officials may 
determine the area of each holding, and award each to 
the person offering the highest rent. In this case rack- 
renting would arise, unjustly diminishing the reward of 
labour and augmenting rent, though not perhaps to the 
existing level. 

Or the officials, having determined the area of each 
holding, themselves fix the rent and award possession to 
applicants selected by themselves or by ballot. The ballot 
system, however, has been found liable to abuses, to which 
the term "dummying" has been applied in Australia. 
These abuses may, perhaps, be worse than those which 
result from official selection. In either case the temptation 
to favour particular individuals by awarding them land at 
exceptionally low rentals, or giving them a preferential 
opportunity so to acquire it, would be irresistible. Jobbery 
and corruption in the one case, rack-renting in the other, 
therefore, are unavoidable and additional results of land 
nationalisation by purchase. 

Reflection will show that purchase of the rental valUe 
of land, exempting improvements, must lead to similar 
results as purchase of the land itself. Both these 
methods, therefore, fail to comply with the conditions 
laid down. 

The confiscation of the rent of land is another method 
which might be considered. Apart from the question 
whether this method is practicable — whether it can be 
employed without provoking civil war — slight considera- 
tion shows that, in addition to the unavoidaole suddenness 



CHAP. Ill THE METHOD OF REFORM 379 

of the change, it would inflict the utmost hardship on both 
landowners and landless men. 

Present owners of land, suddenly deprived of the rent 
which to many is the main source and to some the only 
source of income — unaccustomed as many of them are to 
any productive labour — would be exposed to hardship 
approaching injustice. Nor could the landless classes 
escape. A large proportion of the latter is employed in 
the production of goods and services which are demanded 
by the wealthy classes alone. The sudden appropriation 
of rent and monopoly charges by the State would largely 
reduce the incomes of all wealthy persons, and would 
absorb the incomes of many. The sudden cessation of 
their demand for luxuries and services would destroy the 
opportunities of employment in this direction without im- 
mediately providing employment in other directions. To 
both these classes, therefore, the confiscation of rent would 
be provocative for a considerable time of widespread hard- 
ship and distress. For this reason, as well as on account 
of its inevitable suddenness and of the necessity of govern- 
mental interference in the use and disposal of land, the 
confiscation of rent also fails to offer any adequate solution 
of the question under consideration. 

There remains but Henry George's Single Tax method, 
consisting of the gradual appropriation of the rent of 
land and of natural monopolies and the similarly gradual 
removal of all other taxation and charges for the use of 
equal natural and social opportunities. This method, 
proceeding slowly and gradually, would not disorganise 
industry nor inflict appreciable hardship on any one. The 
great majority of landowners would benefit more by the 
removal of taxes and charges than they would forgo by 
the loss of the rent of their land. The owners of large 
areas or of exceptionally valuable land would lose more 
than they would gain, but at first the loss would be un- 
important. Before it could reach important dimensions 
many of the existing owners would be dead, and the re- 
maining ones would either have adapted themselves to the 
new condition by qualifying for productive occupations, 
or would find consolation in the wealth remaining to them. 



38o DEMOCRACY VERSUS SOCIALISM part v 

The hardship, if any, to the owners of land would thus be 
minimised, while the masses of the people would derive a 
great advantage from the first introduction of the system, 
an advantage which, growing with its extension, would 
culminate with its completion. For the imposition of even 
a small tax on land values, especially if its augmentation 
be apprehended, would lower rents, induce a more efficient 
use of land, increase the demand for labour, and therefore 
tend to increase wages. For these reasons : The owners 
having to pay the tax on the rental value of land, and not 
according to the income which the use of the land yields 
— having to pay the same amount whether the land is used 
and yields an income, or whether it is unused and yields 
no income — would either themselves use the land in the 
most advantageous way, or let or sell it to others who 
would so use it. There would thus arise a greater com- 
petition between landowners for tenants and buyers, and 
consequently a fall in the capital and rental value of land ; 
there would arise a greater demand for labour to work 
upon land — whether urban, agricultural, or mining land — 
and consequently an increase in the reward of labour. 
Other forms of taxation being simultaneously reduced, 
the increased earnings of labour would be less infringed 
upon by the State, and monopolies based upon such 
taxation would gradually disappear. Higher money wages 
and lower prices of labour-products would thus combine 
to enhance the well-being of the masses of the people, and 
the consequent increase in their consumptive power would 
tend still further to increase production and the demand 
for labour. Every addition to the tax on land values, and 
every further reduction of other taxes, would strengthen 
these tendencies, until, with the completion of the system, 
there would have arisen an enormous consumption and 
production of wealth, an illimitable demand for labour, 
and a distribution of wealth which, denying reward without 
service rendered, would secure to every one a reward equal 
to the value of the service rendered by him. 

The gradual appropriation of the rental value of land 
would thus secure equal rights to land and unequal but 
equitable rights to labour -products, without appreciable 



CHAP. Ill THE METHOD OF REFORM 381 

hardship to any one, and so gradually as not to provoke 
reaction or to disturb industrial organisation. Yet the 
land would be as effectually nationalised as if it had been 
appropriated by the State. For, as previously shown,^ the 
value of land is nothing else than the price some people 
are willing to pay for the power to levy tribute upon 
present and future users of land. As land-values fall and 
rise with the fall and rise of rent, land-values would dis- 
appear if rent disappeared. Likewise, if the whole rent 
of land goes to the State, private persons will not give 
wealth in exchange for land. Land would lose all market 
value, would no longer be bought and sold, and as society 
would receive all that benefit from land which is not due 
to individual labour, the collective ownership of rent 
nationalises land as effectively as the collective ownership 
of the land itself. 

There would, however, be a total absence of the inter- 
ference of State officials, unavoidable when the land itself 
is made collective property. Present owners can be left 
in possession, and would gradually transfer to users any 
land which they themselves could not use to fullest 
advantage, while unused land could be appropriated by 
any one desirous of using it without let or hindrance. 
The rental value of land can be assessed, and the tax can 
be collected periodically by local bodies, from whose 
assessment appeal can be made to a revision court, either 
by the aggrieved party against over -assessment of his 
land or by any one for under-assessment of others' land. 
The rent which the State receives would thus fall and rise, 
not through the caprice of officials, but through natural 
causes. Likewise, the area allotted to each and the use 
made by him of it would, when the tax is paid on rental 
value without rebate for inferior use, be determined by the 
capacity of each and by social necessities finding expression 
in price, in a manner most advantageous to society and 
without governmental interference. 

At the same time there would prevail the most 
absolute security of possession both of the land and of 
improvements made on the land. As long as any man 

1 Part II. chap. iv. 



382 DEMOCRACY VERSUS SOCIAUSM party 

paid the rent periodically assessed no one could dispossess 
him or his heir or assignees unless the land were required 
for public purposes. In such case, or whenever any 
holder of land wanted to dispose of it to any one else, the 
value of improvements alone would be paid for. This 
security would lead to the fullest use of land, to the most 
extensive application of labour and capital ; while land, 
having no rental value, land at the margin, could be used 
without payment of rent or tax of any kind till such time 
as increase of population and extension of public works 
had given it a value. 

The Single Tax method of securing equal rights to 
land, therefore, avoids the objections which adhere to all 
other methods. There would be no avoidable hardship, 
no sudden and profound change in social relations, no inter- 
ference by State officials with the allotment and use of land, 
and no power to fix rents arbitrarily or enforce rack-rents. 
The exaction of the rent charge would compel holders to 
make the most profitable use of all land, and at the same 
time there would arise the most absolute security of 
possession by the users of land. 

The monopoly-use of land for social purposes, as in 
the case of railways, tramways, canals, and in the supply 
of gas, electric light, and power, and of other commodities 
the supply of which depends upon special privileges in the 
use of land, lends itself to the same treatment. The 
value of such properties is seen easily in that of their 
share-capital and debentures. Deduction from this total 
value of the value of labour -products owned by the 
company reveals the value of its monopoly-rights. This 
value, therefore, could be taxed in the same manner as the 
value of the ownership of other land, and would gradually 
disappear under taxation. 

Nor would such taxation lead generally to an increase 
of the price charged by these monopolies for the services 
which thty render. For this price is generally not deter- 
mined by competition, but by the consideration of greatest 
total profit. Where this is the case, an increase of price, 
far from recouping the monopoly owner for taxation, 
would, by reducing consumption, augment the reduction 



CHAP. Ill THE METHOD OF REFORM 383 

of the total profits. Taxation, therefore, would secure to 
the whole people the value of the monopoly without 
necessitating public management of the industry. 

There are, however, other considerations which may 
be urged for a different ultimate treatment of these mono- 
polies. Railways, tramways, and canals are as much high- 
ways as ordinary roads and streets. The considerations 
which have led to the public ownership of roads and streets 
apply with even greater force to these modern routes of 
communication, and the reasons which have caused the 
almost universal abolition of tolls on roads and streets 
equally apply to them. Cheapness of transport stimulates 
production and aids in the development of national resources. 
Private control of public highways leads to inequality of 
treatment and corrupt practices. 

It is, therefore, in the highest degree desirable that 
these modern highways also shall be owned by society, 
and, like all others, shall be open to public use without 
charge. But there is as little necessity for the State 
conduct of the transportation business over railroads, tram- 
roads, and canals, as there is for the State conduct of this 
business over ordinary streets and roads. For the owner- 
ship of locomotives and other motors, of cars and boats, is 
not a monopoly. The monopoly resides in the ownership 
of the road. The State, therefore, may acquire the road, 
and regulating the traffic so as to ensure safety and 
equality of treatment to the users of the road, may throw 
open the business of transportation to free competition. 
Just as no charge is made to recoup the State for the 
expense of making and maintaining ordinary roads, no 
charge need be made for the use of these roads. The 
State would be repaid, and repaid abundantly, by the 
consequent increase in production and the value of land. 
And just as competition between carriers secures to the 
public the advantages which have arisen from the abolition 
of road-tolls, so would competition between carriers over 
railways, tramways, and canals secure to all the advantages 
arising from their free use. For such carriers owning 
locomotives, cars, motors, or boats would compete with 
each other over every road and canal, and such com- 



384 DEMOCRACY VERSUS SOCIALISM part v 

petition would result in the lowest rates for the carriage 
of goods and passengers, in the readiest adoption of new 
inventions and improvements, and in immense advantages 
to all industries. 

The supply of gas, water, electric light and power, 
and of pneumatic and hydraulic power, however, is not 
open to the same treatment. Here the choice lies 
between absorption of the monopoly value by taxation or 
collective conduct of the industry. The objections to the 
municipal ownership and conduct of such industries, while 
not without weight, are nevertheless much less serious 
than those urged against the socialisation of unprivileged 
industries. For not only is the resulting bureaucracy far 
less numerous and powerful, not only would there remain 
freedom of employment, but the loss of efficiency also 
would be less serious. For these privileged industries, 
economically and ethically distinguished from unprivileged 
industries, are also industrially distinguished. Dealing 
with the supply of goods and services not subject to varia- 
tions in quality, design, colour, and shape, the demand^for 
which can be estimated with facility, these industries can 
be managed by permanent officials with less loss of 
efficiency than other industries. Moreover, as private 
monopolies, they are now generally managed with less 
efficiency than competitive industries, and the further loss 
of efficiency arising from municipal management would, 
therefore, be minimised. Nevertheless, such loss might 
arise, and to it must be added a tendency towards corrupt- 
ing municipal government as well as the possible domina- 
tion of the municipality by its servants. On the whole, 
therefore, it seems preferable to treat these monopolies 
also by the Single Tax method, i.e. appropriating the 
monopoly-value adhering to them by a gradually extend- 
ing system of taxing the monopoly-value and leaving the 
conduct of the industry in the hands of private proprietors 
and their employees. 



CHAPTER IV 

THE ETHICS OF COMPENSATION 

To many minds convinced of the injustice of private 
ownership of land and monopolies, their abolition without 
compensation seems nevertheless unjust and arbitrary. 
As a rule, however, the demand for compensation is urged 
by the defenders of private ownership of land, by those 
who deny that it involves any injustice. Their demand 
for compensation is, however, illogical. For if the private 
ownership of land and legal monopolies rests on the same 
ethical basis as the private ownership of labour-products, 
the compulsory appropriation of land or of the rent of 
land, and the abolition of private monopolies, would 
constitute a glaring act of injustice, even if the fullest 
compensation were p^d. If private property in these 
things involves no injustice, if it infringes no rights, its 
compulsory abolition would be an act of violence as 
purposeless as it is arbitrary, compensation or no com- 
pensation. The question of compensation, therefore, 
cannot arise unless it is admitted that justice demands the 
establishment of equal rights to land and to inevit- 
able monopolies, and the abolition of all unnecessary 
monopolies. 

The upholders of existing conditions who demand 

compensation are illogical in other respects. They deny 

the existence of equal rights to land on two grounds. 

One exemplified by Lord Bramwell is as follows : ^ — 

" Be it that there are natural rights, that is, in a state 

of nature, where there is nothing artificial. But men have 

^ Land and Capital, p. 2. (The italics are Lord Bramwell'i.) 

2 C 



386 DEMOCRACY VERSUS SOCIAUSM party 

formed themselves into a social state ; all is artificial and 
nothing merely natural. In such a state no rights ought 
to exist but what are for the general good — all that are 
should. And what we have to consider is — whether 
private or separate property in land is good for the com- 
munityy 

This reasoning obviously excludes all ethical con- 
siderations. It is not a question whether private property 
in land is unjust, nor whether its abolition with or with- 
out compensation is unjust, but whether either is good for 
the community. What is good for the community must 
be decided by some one or many. Who is he or who are 
they } It cannot be denied that when ethical guidance is 
abandoned, this question cannot be decided authoritatively 
except by the governing body, be it an autocrat, an 
oligarchy, or a majority of the whole people. Whenever, 
therefore, this governing authority decides that the aboli- 
tion of private property in land, without compensation, 
is "good for the community," the governing body 
"should," according to Lord Bramwell, so abolish it. 
Seeing that natural rights do not exist within a society, 
that "no rights ought to exist but what are for the 
common good," the owners of land can have no right to 
compensation when compensation is found not to be for 
the common good. 

The other reasoning is exemplified in the following 
passage : ^ — 

"Nothing also in morals is more plain than that to 
abolish without compensation that private ownership which 
has existed for countless generations, and on the faith of 
which tens of thousands of men in all ages and lands, and 
with the sanctions and under the guarantees of the laws 
of all nations, have invested the fruits of their industry 
and their thrift, would be an act of simple, gross, naked, 
gigantic robbery." 

This reasoning bases the claim for compensation upon 
the hoary antiquity, the governmental sanction, and the 
purchase of land with the fruits of individual industry. 

Without inquiring here whether private and fuU owner- 

^ Lecky, Democracy and Liberty^ voL i. p. 175. 



CH. IV THE ETHICS OF COMPENSATION 387 

ship of land " has existed for coundess generations in all 
ages and lands," ^ it will be admitted that if the facts on 
which Mr. Lecky relies justify his conclusion with regard 
to property in land, they compel the same conclusion with 
regard to property in all other things. Any property 
rights which can or could show the combination of great 
antiquity, general sanction, and frequent sale and purchase, 
can or could not be abolished without compensation. The 
abolition of protective duties and the abolition of rotten 
boroughs in Great Britain, and, above all, the abolition 
of slavery without compensation must then be held to 
have been **acts of simple, gross, naked, and gigantic 
robbery." 

For while property in all these things had been 
recognised for ages, had received general sanction, and 
had been subject to sale and purchase, this is especially 
true of slavery. For slavery, far more truly than private 
ownership of land, may be described as having " existed 
for countless generations in all ages and lands . . . under 
the sanction and guarantees of the laws of all nations," 
and "tens of thousands of men have invested the fruits 
of their industry and thrift" in slaves. Yet not only 
was protection and the system of rotten boroughs in 
England abolished without compensation, but slavery, with 
one exception, was likewise so abolished. 

The one exception is the compensation given by the 
British Parliament to the West Indian slave-owners. Even 
the landlord Parliament of that time, however, did not 
stretch its sympathy with the landlords of the West Indian 
islands so far as to make the abolition of slavery dependent 
upon the slaves themselves compensating their owners. It 
compelled the white slaves of the United Kingdom to 

^ It it denied by all hiitoriani of national economy, amongtt them by one of the 
bitterest opponents of the Single Tax theory, in the following terms : — 

" That individual ownership of land is of comparatively recent institution ... $ that 
even when the private ownership of land was instituted, rights of property were coupled 
with political and military duties and fiscal obligations, which constituted no inconsider- 
able compensation to the community for the loss of its interest in the land ; and, finally, 
that these political and military duties and fiscal obligations have been thrown off by 
the land-owning class, through die exertion of their superior power and influence in the 
formation of public policies and in the enactment of laws, without any adequate com- 
mutation thereof; these things seem to me too well established to admit of question.*' 
— Land and its Rent, by F. A. Walker, pp. 128, 129. 



388 DEMOCRACY VERSUS SOCIALISM part v 

furnish the larger part of the compensation which gave 
freedom to the black slaves of the West Indies. But can 
it be argued that if the people of Great Britain had refused 
to make this sacrifice, British soldiers and police would 
have been morally bound to compel the West Indian 
slaves to work for their masters to all eternity ? Suppose 
the West Indies to have been an independent State. 
Would the slaves have lost all right to freedom unless 
they themselves, or some foreign people, paid their full 
value to the owners ? 

Or suppose a slave escapes from a country in which 
slavery still has legal existence, and finds refuge on board 
a British vessel. Is the slave a thief who has stolen his 
value from his owner, and is the British captain an 
accessory to the theft, unless they pay compensation? 
If it be admitted that the escape of one slave does not 
constitute a theft, does a case of theft or robbery arise 
when more than one, or all slaves, escape from bondage ? 
Must they be considered to be morally still the property 
of their previous owners till compensation has been paid ? 
If not, if they are justified in escaping from their bondage 
without compensation in an illegal way, are they not 
doubly justified in doing it in a legal way ? May they 
not acquire the governing power of the country, and pass 
a law abolishing their own slavery, without thereby incurring 
the obligation to pay compensation ? 

These considerations clearly establish the conclusion 
that no moral claim to compensation can arise from the 
abolition of slavery. Yet property in slaves was sanctioned 
by all the conditions which Mr. Lecky adduces as sanc- 
tioning private property in land. If these conditions do 
not impose the duty of compensation in the one case, 
they obviously cannot do so in the other case. 

It is, however, alleged that the ethical distinction 
between property in slaves and property in land is so 
great that considerations applying to the one property 
cannot be applied to the other property. In previous 
chapters^ it has been shown that this contention is 
erroneous, that land-owning is essentially of the same 

^ Part III. chaps, vl. and vii. 



CH. IV THE ETHICS OF COMPENSATION 389 

ethical character as slave-owning. But this question does 
not arise here. Mr. Lecky does not draw any ethical 
distinction between property and property. He wisely 
bases the sanctity of property in land and the demand 
for compensation, not on ethical considerations, but on 
the conjunction of three alleged facts — long persistence, 
governmental sanction, and investment. If these by 
themselves are insufficient to establish a claim for com- 
pensation in all cases, the abolition of property in slaves 
included, they are equally insufficient to establish this 
claim on the abolition of any particular form of property, 
property in land included. 

So far the claims for compensation on the part of 
those have been considered who deny that it is the duty 
of society to enforce the equal right of all its members 
to land. There remains to be considered the claim of 
those who are convinced that all men have equal rights 
to land, and that the denial of this right deprives the 
majority, or even large numbers of men, of part of the 
product of their labour. Their demand for compensation 
arises mainly from two conditions. One is custom ; the 
existence of unjust laws, obscuring primary morality, leads 
to the formation of secondary views of morality. To 
break the law, or to alter an unjust law, when such alter- 
ation deprives any one of unjust advantages, is regarded as 
more immoral than the maintenance or such laws. . . . 
The moral claim of the victims of unjust laws to a restora- 
tion of their rights is obscured by the false view that 
there has arisen a moral claim on the part of the bene- 
ficiaries to enjoy for all time the advantages which the 
unjust law has hitherto secured to them. 

The second cause for this demand is a special one. 
Land Nationalisation, the acquisition of the land itself by 
the State, was, till Henry George published Progress and 
Poverty y generally regarded as the only measure by which 
the equal rights of all to land could be secured. This 
plan can be carried out either by the acquisition of one 
piece of land after another, or by the State acquiring all 
the land by a sudden act. If the former method be 
adopted, some landowners would continue in the foil 



390 DEMOCRACY VERSUS SOCIAUSM part v 

enjoyment of rent, while others would be deprived of it. 
The injustice of this procedure to the latter, without 
compensation, cannot be denied. Nor can it be denied 
that the sudden confiscation of all land by the State, while 
not unjust, would inflict hardship so great as to approach 
injustice. Under such circumstances the demand for 
compensation, even of those who recognise existing in- 
justice, was natural and inevitable. 

Under Henry George's Single Tax system, however, 
both these causes of partial injustice are avoided : all 
landowners are treated equally, and the transition from 
unequal to equal rights in land is so gradual, and accom- 
panied by such other benefits, that no hardship can arise. 
The reasons which justify the demand for compensation, 
when the clumsy method of Land Nationalisation is con- 
sidered, do not, therefore, apply to the Single Tax system 
of gradual reform. 

If it is admitted that private ownership of land is a 
continued injustice ; that it leads to the perpetual repeti- 
tion of other acts of injustice ; that the proposed method 
of reform treats all landowners equally and inflicts no 
unnecessary hardship, on what moral grounds can com- 
pensation be claimed ? Apart from its other consequences, 
the essence of private ownership of land is that it gives 
to landowners the legal right to take wealth from all 
others without rendering any service. To claim that this 
legalised system of theft ought not to be abolished without 
compensation to the beneficiaries, is equivalent to the 
declaration that it is just and ought not to be abolished 
at all. For if the rent of land does belong to the com- 
munity, if its appropriation by landowners is an act of 
usurpation, how can it be held that the community must 
purchase it? The claim for compensation, therefore, is 
a direct denial of the right of all to the rent of land and 
to equal rights in land. 

Moreover, if compensation is paid, the injustice con- 
tinues which enables a few to appropriate wealth belonging 
to the many. For the interest on bonds given in com- 
pensation, would enable the holders to extract even more 
wealth from the community than they now do as rent, 



cH.iv THE ETHICS OF COMPENSATION 391 

and equally without rendering any service in return. 
This fact, as well as the further result, that only the 
wealthier landowners can benefit by compensation, while 
the great majority of landowners would be injured by it, 
has already been dealt with in the preceding chapter. 
Compensation, therefore, is an absolute denial of justice — 
would perpetuate and aggravate existing injustice under 
another name. 

Plausible reasons are advanced for compensation. One 
is, that a majority of the people having hitherto sanctioned 
private ownership of land, it must be held that all have 
sanctioned it. This contention, however, is self-destruc- 
tive, even apart from the consideration that the right of 
unborn generations, as well as of those now living, is 
involved. For if the sanction of a majority may be 
construed to be a sanction by all in one case, it must be 
so construed in all cases. Therefore, if a majority of 
the people sanctions a law appropriating the value of all 
land without compensation, it must be construed to be 
sanctioned by all, landowners included. Hence the claim 
for compensation on account of constructive general 
sanction, is met by the equally valid claim for no 
compensation based on constructive general sanction. 

Another claim is that, as much land has been purchased 
with labour-products, the abolition of private ownership 
without compensation would be equivalent to the con- 
fiscation of these labour-products. This claim overlooks 
the obvious fact that purchase alone can give no moral 
right to the thing purchased. In order to establish such 
right in the purchaser, the seller must have a moral right 
to sell, must be the rightful owner. Purchase of a slave 
can give no moral right of ownership, because the seller had 
no moral right of ownership in the slave. Can it be alleged 
that any of the past sellers of land were the rightful 
owners of the land.^ If they were not — a conception 
necessarily involved in that of the injustice of private 
ownership — the present holders also cannot be rightful 
owners. Nor does the sanction by the State of the sale 
and purchase of land, nay, not even sale by the State, 
alter this position. Neither the State nor any individual 



392 DEMOCRACY VERSUS SOCIAUSM part v 

was morally the owner of the land; the title of every 
owner of land is morally vitiated by the fact that neither 
State nor individual holds or can hold a saleable interest 
in land. The land belongs to no one ; the right to use 
it belongs equally to all men, not merely to Qiose now 
living, but to all the generations of men who ever shall 
live on it. The notion that a body of men, mere passing 
forms of matter, inhabiting this earth but for a brief 
period of time, may for ever dispose of the earth, is 
surely one of the strangest examples of that secondary 
morality previously alluded to. 

Moreover, it must not be forgotten that what present 
owners acquired when they purchaised the land was not so 
much the land itself as the legal right to appropriate rent, i.e. 
to levy tribute on the present generation of their fellow-men, 
and to transmit to others 3ie power to levy tribute on 
future generations. No government, even with the consent 
of all the present members of the State, can possess the 
moral right to sell this power ; no purchaser can morally 
acquire it, and no compensation can be claimed on the score 
of morality from those who refuse to submit any longer to 
this immoral exaction. If they refuse to pay it they con- 
fiscate no labour-products — they simply refuse to allow any 
further confiscation of their own labour-products. 

The owners of land lose nothing positive when the rent 
of land is appropriated by the State. The wealth they 
gave for that rent is gone ; they exchanged it for the 
power to levy tribute. No wealth taken by them in rent 
or otherwise is demanded of them ; they simply lose the 
power of levying further tribute. Granted that when they 
bought the land they expected that soldiers and police 
would for ever enforce this wrong. They have miscalcu- 
lated, and cannot ask others to bear the resulting loss. If 
they could claim compensation on the ground of their 
disappointed expectation, all other persons who incur losses 
because the State acts contrary to their expectation would 
be equally entitled to compensation. On the passing of a 
Usury Bill making illegal a rate of interest previously not 
illegal, all those who had purchased the goodwill of a money- 
lending business, or who had spent years in learning its 



CH. IV THE ETHICS OF COMPENSATION 393 

manifold intricacies and chicanery, would be entided to 
compensation for the disappointed expectations that their 
practices would not be interfered with by law. If a new 
Company Act be passed endangering the safety of pro- 
moters who indulge in practices not previously forbidden 
by law — promoters who have invested the result of their 
industry and thrift in showy office furniture and in 
acquiring a widespread connection among touts and financial 
journalists — they would be morally entitled to compensation 
for the disappointment of their expectation of the continu- 
ance of a defective law. 

Still stronger would be the position of other claimants. 
If Parliament passes an Electric Lighting Act, it necessarily 
injures some gas company or dealers in other lighting 
substances and appliances who, when they entered upon 
their business, did not and could not foresee the use of 
electric light. Similarly, when Parliament passes a Railway 
Act, it necessarily disappoints the expectation of numerous 
carters, hotel-keepers, tradesmen, and others, and frequently 
reduces the value of property. In these and all like cases 
compensation would be due. 

Other claims are stronger still. Why should a protected 
manufacturer be robbed of the power which Legislatures 
have granted him of charging higher prices to his fellow- 
citizens than he can charge to others ? Is not compensation 
due to him also if the State deprives him of this valuable 
property or reduces its value ? Or if, as has been done in 
Ireland, laws are passed under which tenants are given 
security of possession in the improvements which they place 
on the land, which reduce rack-rents and abolish indebted- 
ness incurred by tenants to landlords for non-payment of 
past rack-rents ; or if by law railway rates are made less 
extortionate, are not the landlords and railway companies 
entitled to compensation for consequent loss of revenue 
and reduction in the value of their property ? 

Or consider this case : Contributions from the general 
revenue to local rates transfer to the whole community 
expenditure for purposes which add to and maintain the 
value of the land in localities so favoured. The rental 
value, as well as the capital value of land, and of nothing 



394 DEMOCRACY VERSUS SOCIALISM part v 

else, is increased by imposing upon the general taxpayer 
expenditure which otherwise must be borne by the owners 
of land, and from which they alone derive pecuniary 
benefits. Suppose the Legislature, recognising the im- 
morality of this action, were to refuse to enforce in the 
future such confiscation of the rightful property of all for 
the exclusive benefit of some landowners. Would the 
Legislature act immorally if it discontinued paying aid to 
local rates out of the general revenue without compensating 
landlords for the resulting loss to them ? Could the fact 
that landlords generally expected the continuation of the 
present system, and that some purchased land at the higher 
value resulting from it in the expectation of its continuance, 
create the moral obligation to pay compensation ? If these 
questions are answered in the negative, as they will be 
answered by most, and in part have been answered by the 
British and other Legislatures, it is admitted that the dis- 
appointment of expectations cannot entitle to compensation. 
If they are answered in the affirmative, all and every reform 
of injustice is declared to be immoral. For whenever a 
thoughtless or corrupt Legislature had granted a monopoly 
or conferred an unjust advantage upon some at the expense 
of others, its removal would be possible only on condi- 
tion that the beneficiaries should retain their full power of 
exaction in another form through compensation. Not only 
would all reform be made impossible by the acceptance of 
the doctrine that the beneficiaries of unjust legal privileges 
cannot be deprived of such privileges without compensation, 
but the tendency to corruption, which inevitably arises 
when Legislatures grant monopolies, would be increased 
manifold, and all monopolies would largely rise in value. 

Another argument advanced is that the State appro- 
priation of the rent of land, however gradually it might be 
effected, would destroy the sanctity of property generally, 
and would, therefore, inevitably lead to Socialism. This 
argument obviously disregards any distinction between 
that which morally is private property and that which is 
not, as well as the results which have arisen from the 
disregard of this distinction. For it is precisely the con- 
fusion of unrightful property with rightful property which 



CH. IV THE ETHICS OF COMPENSATION 395 

has given rise to and maintains Socialism. Those who, 
failing to observe this distinction, nevertheless see that 
property rights are disregarded, that the labourer is daily 
despoiled of his property, naturally revolt against the, in 
these circumstances, hypocritical claim of the sanctity of 
property. They condemn all property rights because 
they fail to see that it is the maintenance of property 
rights in monopolies which destroys the sanctity of property 
in labour-products. Compensation perpetuating the viola- 
tion of just property rights would also perpetuate the 
revolt against all property rights. The reform here 
pleaded for cannot be fully or even largely realised till a 
majority of the people have become seized of this dis- 
tinction. When they have become aware of it, the sanctity 
of rightful property — of property in labour-products — will 
have gained the secure and lasting foundation which it now 
lacks. The appropriation of the rent of land and other 
monopolies without compensation, therefore, alone can 
secure full recognition for the sanctity of property — 
compensation would tend to still further weaken that 
recognition. 

The argmnents on which the demand for compensation 
is based are untenable. But it is not a question of 
argument ; it is one of sentiment. Men hesitate before 
adopting a truth fully; they desire compromise with 
error. Could not existing injustice be removed without 
depriving its beneficiaries of the advantage which they 
derive from it ? This, unconsciously perhaps, is the desire 
of those who, recognising existing injustice and desiring 
its abolition, nevertheless claim that compensation must be 
paid to those who benefit from it. This desire cannot be 
fulfilled. Justice in the distribution of wealth cannot be 
achieved without reducing the amount of wealth which 
goes to those who receive more than their just share. 
Reward cannot be proportioned to service as long as some 
receive rewards for which no service has been rendered. 
As fire and water cannot mingle, so it is impossible to 
combine the removal of injustice with compensation to 
those who benefit by injustice. Those who advocate the 
one thereby oppose the other. 



CHAPTER V 

THE SUFFICIENCY OF THE REFORM 

Though man can never foresee all the consequences of 
even minor interferences with social relations, though for 
this reason alone considerations of expediency offer no 
reliable guidance for social conduct, yet it is not impossible 
to foresee the wider results of any measure based on con- 
siderations of justice. For, apart from the certainty that 
measures founded on justice and recognised as such by the 
community must work beneficially, it is possible to trace 
social symptoms to their causes, to establish a causal 
relation between unjust laws and resulting evils. Where- 
ever this has been done successfully, it may be positively 
asserted that the removal of the cause must, sooner or 
later, lead to the disappearance of the resulting evils. It, 
therefore, is possible to present in broad outlines a picture 
of the changes in social relations which the gradual adoption 
of the Single Tax system must produce. 

Speculation in land, increasing its price, and, by holding 
land out of use or full use, increasing the rent of all land, 
becomes purposeless and injurious to the speculators when 
the annual value of land must be paid in taxation whether 
the land yields an income or not.^ Hence would arise 

^ That even a small tax on land-values tends to restrict speculation in land and the 
holding of land for inferior purposes, is admitted in the following passage taken from 
The Report of the Royal Commission on the Housing of the fVorking Classes^ 1885 : — 

"At present land available for building in the neighbourhood of our populoat 
centres, though its capital value is very great, is probably producing a small yearly 
return until it is let for building. The owners of this land are rated, not in relation 
to the real value, but to the actual annual income. They can thus afford to keep their 
land out of the market, and to part with only small quantities so as to raise the price 
beyond the actual monopoly price which the land would command by its advantages of 
position. Meantime, the general expenditure of the town on improvements is increasing 



CH. V SUFFICIENCY OF THE REFORM 397 

a fall in rent, increasing facilities for production and 
increase in the demand for labour. To the direct benefit 
of lower rents would thus be added the indirect benefits of 
a greater demand for labour and higher wages. 

This reduction in rent will be augmented by the 
removal of all rates and taxes on improvements. Buildings 
will not be erected unless there is an expectation that they 
will return interest on the outlay in addition to all recurring 
expenses. Hence any taxation of buildings restricts the 
building of houses till the resulting scarcity forces up 
house-rent to a level which will yield interest and tax. 
When such taxation is removed, buildings will be erected 
as soon as it is expected that rent will cover interest alone. 
Hence a greater abundance of houses and a corresponding 
fall in house-rent. 

The purchasing power of wages, increased by this fall 
in rent, will be still further augmented by a fall in prices, 
resulting from the abolition of customs and excise duties, 
stamp duties, and other imposts, and from the disappear- 
ance of the monopolies to which such duties give rise. 

More important than these changes are those which must 
arise in the production of wealth. The absolute necessity, 
arising from the appropriation of rent by the community, 
of putting land to the highest use for which it is fitted, 
enforces an enormous and constant demand for labour. 
At the same time labourers can obtain land without being 
compelled to part with any savings in its purchase. 
Hence, in addition to an enormous demand for labour, 
will arise a real independence of labour. So many 
labourers will be able to employ themselves, and in the 
absence of monopoly the anxiety of capitalists to employ 

the value of their property. If this land were rated at, say 4 per cent on its telling value, 
the owners would have a more direct incentive to part with it to thote who are desirous 
of building, and a twofold advantage would result to the community. First, all 
the valuable property would contribute to the rates, and thus the burden on the 
occupier would be diminished by the increase in the ratable property. Secondly, 
the owners of the building land would be forced to oflFer their land for sale, and 
thus their competition with one another would bring down the price of building land, and 
so diminish the tax in the shape of ground-rent or price paid for land which is now 
levied on urban enterprise by the adjacent property owners — a tax, be it remembered, 
which is no recompense for any industry or expenditure on their part, but is the natural 
result of the industry and activity of the townspeople themselves. Your Majesty's 
Commissioners would recommend that these matters should be included in legislation 
when the law of rating comes to be dealt with by Parliament." 



398 DEMOCRACY VERSUS SOCIALISM part v 

labour will be so great, that wages must rise till they equal 
the value of the product of labour.^ 

This point reached, there can never be witnessed such 
a spectacle as, unfortunately, is only too familiar now — 
men, willing and able to work, unable to find an oppor- 
tunity to earn their bread. For when there are no 
monopolies in which wealth can be invested, no wealth can 
be saved except in forms which directly aid production 
and which are consumed in production. All saving then 
leads to increased production, increased production to a 
greater demand for and reward of labour, and as the 
workers receive the full product of their labour, con- 
sumption can and will keep pace with production.* There 
will then not necessarily be more wealth than now, at any 
given time, but there will be an infinitely greater 
production and consumption of wealth. General over- 
production, involuntary idleness, and commercial crises 
will have disappeared from social life. 

Large fortunes also will disappear as undeserved 
poverty disappears. Whoever examines such fortunes — 
whether they are those of territorial magnates, as the 
Dukes of Westminster and Bedford, the Earl of Durham, 
the Marquis of Bute, or the Astor family ; or whether 
they are those of commercial and industrial magnates, as 
the Rothschilds, Rockefellers, Goulds, Vanderbilts, and 
others — can see at once that they mainly consist, not of 
real wealth, but of the value of monopoly rights. The 
disappearance of private monopoly rights would, therefore, 
cause the disappearance of the bulk of these large fortunes. 
Some men might still earn large and even enormous in- 
comes by rendering corresponding services, but such 
incomes would no longer coalesce into large and per- 
manent fortunes. For the permanency of all large 
fortunes depends upon the possession of monopoly rights. 
If they are invested, as under the Single Tax system they 
would have to be invested, in competitive industries, they 
are ephemeral. The power of any man to superintend the 
employment of capital in competitive industries is limited. 
If the capital so invested exceeds a certain limit, the 

1 See Put II. chap. x. * Ibid. 



CH. V ' SUFFICIENCY OF THE REFORM 399 

supervision must be inefficient, losses must arise, and the 
labour and anxiety are excessive. Hence, no one will then 
desire to own such large fortunes ; and even if any one 
should desire to do so, he would break down under the 
strain of preserving it, while constant losses would 
diminish its bulk. The ambition of men earning large 
incomes would, therefore, be directed into other channels 
than the accumulation of excessive fortunes. It would 
probably take the direction of donations for public 
purposes during the lifetime of the donors, to an extent 
which cannot now be realised. 

The gradual increase in the reward of aU labour and 
diminution of large fortunes would tend to remove class 
distinctions. When no one can live sumptuously without 
labour ; when no one can ape the manners and customs of 
those who live sumptuoudy without rendering service, 
labour, which is still regarded as servile in spite of the 
abolition of chattel slavery, will be no longer so regarded. 
Society being thus levelled up and levelled down, the vices 
which arise from excessive riches and extreme poverty will 
alike disappear. Free education throughout all grades of 
knowledge will still further tend to the removal of class 
distinctions and to a greater coherence of society. The 
working classes, able to save capital out of their wages, 
and raised to a high level of knowledge, reasoning power, 
and morality, will no longer be compelled to work for 
wages. Forming themselves into joint-stock companies, 
they themselves, in conjunction with other workers who 
possess organising and managing ability, will be the owners 
of the factories, farms, and mines in which they work. 
Wage-industry will thus be superseded, gradually and 
largely, by co-operative industry. Capitalists, as a separate 
class, may not disappear entirely, but will be largely 
reduced in number. Such organisers only as, on account 
of their exceptional ability, can pay higher wages than can 
be earned in competing co-operative establishments, can 
attach a sufficient number of good workers to their service 
for any length of time. Nor will the wage-worker entirely 
disappear. Young men who have not yet saved enough 
to acquire a share in a co-operative concern, the less able 



400 DEMOCRACY VERSUS SOCIALISM part v 

and steady workers, as well as some who have lost their 
savings, will always form a residue of wage-workers. But 
their number also will be enormously reduced. Capitalist 
and labourer will generally be united in the same person, 
removing the last tincture of the stigma attaching to hand- 
labour, and producing a democratic society of unpre- 
cedented homogeneity and cohesion.^ 

Long before this stage has been reached, all such 
restrictive legislation as that against excessive hours of 
labour and against unhealthy and overcrowded work- 
rooms, as well as laws directed to ensure the safety of 
workers and to fix a minimum of wages, will have become 
objectless. For the workers, being mostly free to work 
for a capitalist, or to employ themselves, stronger in 
competition than capitalists when capital cannot be in- 
vested in monopolies, will not enter employments which 
do not offer favourable conditions in all these respects. 
Capitalists will either have to comply with the standards 
fixed by the workers, or pay higher wages to compensate 
for conditions below this standard, or will be imable to 

^ The following figures taken from the Statistical Registers (1897) of the Colonies 
of Victoria and New South Wales show the small amount of capital required by 
labourers to enable them to take their place as full partners in co-operative factories : — 



Colony. 


No. of workers 
in factories. 


Value of capital 

in factories, 

i,t, machinery, 

plant, buildings, 

and improvements. 


Value of capital 
per worker 
employed. 


Victoria 

New South Wales 


5M39 


1^8,993,544 
£9,974,228 


£170 13 1 
£190 8 I 



American statistics, though less definite, nevertheless confirm this result. Tie 
Abstract of the Eleventh Censm, 1890, gives the following figures : Capital of 
manufactures and industrial works $6,139,397,785, average number of employees 
4,476,884. The amoimt of capital for each employee would thus appear to be $1371 
or j^274. As, however, the " capital ** recorded includes land-values and may also 
include other monopoly-values, the amount of real capital will scarcely be larger per 
worker than it is in the Australian colonies cited above. 

Sir Benjamin C. Browne, President of the North-East Coast Association of Engineers and 
Shipbuilders, Newcastle-on-Tyne, has favoured me with the following information : — 

^^£150 is just about the amount of capital required per man in engineering, ship- 
building, etc. in England. . . . For example, in my own works the capital account is, 
including debentures, just below £600,000, and when fairly busy, but not extremely so, 
we employ just about 4000 men. ... I think if you took £125 as a minimum 
and £175 as a maximum you would be very safe, except for purely repair business or 
where tome very exceptional circumstances arose." 



CH. V SUFFICIENCY OF THE REFORM 401 

obtain workers. At the same time, there would disappear 
child-labour and the labour of married women in factories, 
while such employment for unmarried women would either 
be more and more shunned, or would be carried on under 
greatly improved conditions. Fathers and husbands in 
receipt of ample wages would as little think of sending 
their wives and children into factories as do the members 
of the middle class now ; and parents would not allow 
their grown-up daughters to work there, except for short 
hours and in the absence of adequate household labour. 

While the gradual adoption of the Single Tax system 
would thus profoundly change the industrial life of the 
nation, it would likewise improve the family life. Slums, 
as well as the present style of workmen's houses, would 
disappear, and give way to decent houses and cottages, 
with ample room for all the amenities and conveniences of 
life. For while a private owner, aiming at the highest 
rent from his plot of land, is compelled to pack it with 
houses, it is a matter of indifference to the State whether 
a given rent is derived from 10 or from 50 square miles. 
Under the Single Tax system, cottages would be built on 
land surrounding the cities, with ample grounds, and 
factories would follow. The resulting withdrawal of 
population from crowded cities would empty present slums 
and streets, and would lower the rental-value of the land 
there sufficiently to allow of cottages being built there also 
on larger areas, the sole condition which would enable 
them to compete with suburban garden-homes. The first 
condition of a healthy family life, good homes offering 
privacy to all members of the family, would thus be 
secured for the whole people. 

The high price of labour would make domestic service 
a rare condition, and would, combined with the generally 
high education and culture, lend it a new character. For 
machinery would then largely take the place of domestic 
hand-labour, and many domestic operations, notably cook- 
ing and laundry work, would be mainly carried on as an 
industrial occupation, meals being either partaken of in 
restaurants or sent to the houses of consumers from such 
establishments. The slavery of married women of the 

2 D 



402 DEMOCRACY VERSUS SOCIAUSM part v 

lower, middle, and labouring class would thus be abro- 
gated, to the great advantage of themselves and their 
families. 

The depopulation of the country districts also would 
cease. For the land is used to best advantage when it is 
used in small areas by independent labourers. The taxa- 
tion of rent would force landowners to allow it so to be 
used, and the country would then again afford ample 
opportunities for a healthy, profitable, and pleasurable life.* 

Not only would the exodus of the country population 
to the cities be stopped, but a great return flow from 
towns and cities would take place. Town life and country 
life would thus lose much of their distinctive character. 
Townspeople living in garden-homes, and country-people 
living far more closely together than at present, would 
gain physically, mentally, and morally by this change. 

Socialists not infrequently have denied the efficacy 
of the Single Tax system as a cure for social injustice. 
While ardent claimants for Land Nationalisation, they deny 
that any plan of Land Nationalisation will suffice to procure 
social justice. An examination of the reasons on which 
this denial is based will, however, show its erroneous 
character. Mr. H. M. Hyndman, President of the Social 
Democratic Federation of Great Britain, is one of these 
objectors. He states : — 

^ *^ In the Thames Valley ten or twelve villagers in Flackwell Heath took between 
them a farm of mine of over 200 acres, at the same rent as the outgoing tenant paid. 
They have had it for four years, and are working it profitably and paying their rent. 
They employ more labour than the old tenant did j they pay better wages ; and one 
man, during the first year of his take, grew more corn and straw on twenty acres than 
was got off the whole farm the year before, when it was cultivated by a single farmer. 

** The parish of Humberstone, in Lincolnshire, is part of the Carrington estate, and 
consists of 2700 acres. The custom in this village has always been, that three or more 
acres of land go with most of the cottages. ... In Humberstone the labourers' children 
are healthy and well fed, and the labourers are industrious, steady, hardworking men, 
who have for themselves solved the problem of Old Age Pensions by their own savings 
from their little piece of land and cows. . . . There are no poor, and I do not know 
of any one of this parish going to the workhouse or receiving outdoor relief for 
years. . . . 

^Another proof that allotments pay is afforded by the applications made to the 
Holland County Council for small holdings. In 1892, 112 applications were made, and 
every one of the applicants possessed capital ranging from j^io to ^C^^o, which they had 
obtained by cultivating allotments. . . . 

** What also is a most important feature is, that many of the tenants are young men 
who would certainly not have been content in that district on a mere weekly wage of 12s. 
or 1 5s., but would assuredly have tried their fortunes in our large towns. . . ." — ** The 
Land and the Labourers," by Lord Carrington, TAe Nhuteentk Century^ March 1899. 



CH. V SUFFICIENCY OF THE REFORM 403 



" If agricultural rents and ground rents were taken by 
the State to-morrow, the main difficulties of our great 
social problem would be almost as far from solution as 
ever. It needs but few figures to make this clear. Out 
of the total agricultural production of Great Britain, 
which is estimated to be worth, one year with another, 
;^ 300,000,000, the landlords take, at the outside, little 
more than one-fifth, or ^65,000,000 as rent. But as the 
late Mr. Toynbee pointed out, of this ^65,000,000 not 
more than ^30,000,000 would represent the * unearned 
increment ' owned by individual landlords. Say the ground 
rents and royalties amount to another ^60,000,000, only 
one-half of this would be unearned increment either, and 
it is still the fact that by mere confiscation of competition 
rent the State would not get more than ^60,000,000 a 
year, the rest being, in one way or another, profit on in- 
vested capital, which, on this basis, it is not proposed to 
touch. . . . Now, granting that this is a vast sum, which 
would pay at least two-thirds of our present imperial 
revenue, now levied by direct and indirect taxation — and 
this is the proposal of these champions of the enforced 
confiscation of competition rents — what class would be 
benefited thereby ? . . . Unquestionably the capitalists, 
who will be relieved of taxation to a large amount them- 
selves, and who, on the taxation of the workers being 
lessened, would reduce wages on the average by the 
amount of such remittance." ^ 

The reasons, and the only reasons, which Mr. Hynd- 
man thus adduces for his allegation that the adoption of 
the Single Tax system would leave " the main difficulties 
of our great social problem almost as far from solution as 
ever," are : ( i ) That the amount of rental-values is small ; 
(2) that the capitalist will be relieved of taxation ; (3) that 
wages will fall pari passu with the removal of taxation from 
the earnings of the working population. 

The validity of the first reason turns entirely upon 
a question of fact. Against Mr. Hyndman's guess of 
^60,000,000 as the annual value of land in the United 
Kingdom may be placed the reports of the Commissioners 

^ Hyndman, TAe Historical Basis of Socialism^ pp. 300, 301. 



404 DEMOCRACY VERSUS SOCIALISM part v 

of Inland Revenue, as revealing the actual land-values on 
which taxes are paid. The report of 1897 shows taxes to 
have been paid in 1896 on annual land-values amounting 
to ^202,221,944, after all improvements have been de- 
ducted, a sum more than three times as large as Mr. 
Hyndman's estimate.^ Nor is it astonishing to find Mr. 
Hyndman's guess so wide of the mark, when he regards 
royalties and ground rents as composed of improvement 
values to half their amount. A further peculiarity, which 
Mr. Hyndman shares with other critics, is, to disregard 
the manifest consequential changes which such a profound 
modification of existing social conditions as the appropria- 
tion of rent by the State must entail. 

It is advisable to meet here the allegation, fi-equently 
made, and on no better evidence than that adduced by 
Mr. Hyndman, that annual land-values are lower gener- 
ally than the revenue which governments require from 
taxation. The opposite is true : in all civilised countries 
the annual value of land largely exceeds the revenues 
raised by taxation. In the United Kingdom the imperial 
and local revenues raised by taxes, duties, rates, and tolls, 
amounted in 1896 to ^138,852,859,^ as against an annual 
land -value of ^202,221,944, showing an excess for the 
latter of over ^63,000,000. Likewise in the United States 
the total national, State, and municipal revenues raised by 
taxation in 1890 amounted to $828,541,000, while the 
annual value of land, as far as it can be ascertained, 
was $1,591,793,000, leaving an annual surplus of 
$763,252,000.* The colony of Victoria, when at its 
lowest ebb in 1893, shows an annual land -value of 
^6,514,832, while the State and local revenues raised by 
taxation, with the deficit of the year added, amounted 
to ^^4,045,767, showing an excess of land-values of 
^^2,469,065.* These instances, comprising countries differ- 
ing widely in their state of development, show that, gener- 
ally, the rental -value of land exceeds that part of the 

^ See Appendix, Table I. A pamphlet iuued by the Fabian Society, Facts fir 
Socialists^ p. 5, states the annual rental -value in the United Kingdom to be 
1^230,000,000. 

> See Appendix, Table II. ^ See Appendix, Table III. 

^ See Appendix, Table IV. 



CH. V SUFFICIENCY OF THE REFORM 405 

common expenditure which is met from taxation, and will 
be sufficient to meet this expenditure even when spurious 
rent has disappeared, and apart from the consideration 
that the necessary expenditure of governments will be 
largely reduced under the Single Tax system. 

Mr. Hyndman's second objection, that capitalists would 
be relieved from taxation as capitalists, is true, but prob- 
ably to a smaller extent than he supposes. In the 
United Kingdom the amount which capital contributed to 
the imperial and local revenues in 1896 was, as far as can 
be ascertained, ^^35,752,729, while the contribution of the 
working population was ^73,013,217.^ 

The fact that capital will be freed from taxation is not, 
however, a valid objection ; on the contrary, it seems to 
be one of the merits of the Single Tax system. Mr. 
Hyndman has overlooked that the great capitalists are 
invariably owners of monopolies, and would pay far more 
in taxes on monopoly than they now pay in taxes on 
capital. Moreover, the question surely arises. Does the 
taxation of capital benefit the working population ? Even 
if it were admitted that under existing conditions it does 
not harm them — which it must do if it in any way lessens 
the employment of capital — it surely cannot in any way 
increase their wellbeing, as the taxation of monopoly does. 
Hence, even if present conditions alone are contemplated, 
the escape of capital, i.e. labour-products from taxation 
cannot be urged as a valid reason against the utility of the 
Single Tax system. When, however, it is recollected that 
under the altered conditions which the application of this 
system will create, capital will be owned largely, if not 
wholly, by the workers themselves, the futility of this 
objection becomes still more apparent. 

Mr. Hyndman's third reason, that the removal of 
taxes which fall on the earnings of labour is invariably 
accompanied by a corresponding fall in their wages, is 
again largely a question of fact. Between 1825 and 1861 
an enormous load of taxation was removed off the 
shoulders of the workers of Great Britain. Did their 
wages fall during this period, or are they lower now than 

1 See Appendix, Tables V. and VI. 



4o6 DEMOCRACY VERSUS SOCIALISM part v 

they were in 1825 ? Did the abolition of the Corn Laws, 
as one example, lead to a reduction in British wages? 
On the contrary, there is not a statistician or economist of 
any standing who does not paint in glowing colours the 
improvement in the condition of the working population 
since this date, an improvement arising alike n-om an 
increase in money wages and from an increase in the 
purchasing power of every unit of such wages. Even 
socialist economists admit these facts.^ It is, therefore, 
manifest that Mr. Hyndman's third and last objection is 
as erroneous as the others. 

It is not denied that there are circumstances in which 
a reduction of taxes which fall on wages would reduce 
money wages. When production is stationary, wages tend 
to fall to the subsistence level, because rent and monopoly 
charges gradually encroach upon and absorb all the excess 
produce. A reduction of taxes on labour would in such 
conditions merely lead to an increase of rent. Advancing 
production, however, necessarily increasing the demand 
for labour, counteracts this tendency even under existing 
conditions, and preserves the advantage more or less to 
labour. The Single Tax system, however, would absolutely 
destroy the tendency of wages to fall to the subsistence 
level which Mr. Hyndman, in common with socialists 
generally, exaggerates into an invariable fact. For as rent 
becomes a common possession, any reduction in individual 
wages would be compensated for by an increase in the 
common possession ; and as rent rises, this common fund, 
assuming more and more importance, would tend to 
modify differences of condition arising from differences in 
individual ability. And further, as labourers are mostly 
able to employ themselves when rent is common property, 
labour is more powerful in bargaining for wages than 
capitalists, and wages would therefore always be at the 

^ ** It will not, I think, be generally disputed that the last sixty years have seen a 
very great advance in the condition of a very large part of the people" (p. l6). ** It is 
unnecessary to say very much about the general rise in money wages which has taken 
place since 1837. There seems no reason to doubt, so far as concerns the male workers, 
the general accuracy of Sir Robert Giffen's conclusion that the rise in nearly all 
trades has been from 50 to 100 per cent '* (p. 9). " I see no reason to donbt the 
statistical conclusion that prices are on the whole lower than in 1837 " (p. 22). — Sidney 
Webb, Labour in the Longest Reign, 



CH. V SUFFICIENCY OF THE REFORM 407 

highest possible level, i.e. equal to the value of each 
labourer's product.^ 

Mr. J. A. Hobson attacks the efficiency of the Single 
Tax system from other standpoints.^ 

" The most casual reflection upon the recent course of 
English industrial history would seem to make it evident 
that other classes have partaken, and more fiilly than the 
landowners, in the immense growth of industrial wealth 
during this century. . . . Those who regard the nationali- 
sation of the land of England as a cure for all the ills 
that states are heir to, ignore the leading feature of our 
modern commercial policy, its internationalism. Grant 
their major premises that common ownership and control 
of land will procure equality of economic opportunities for 
all citizens and cut away the natural supports of all 
industrial monopolies, can such a consummation be attained 
by us by nationalising the land of England ? Is not the 
land of America, China, Egypt, Russia, and all other 
countries, which by trade intercourse supply us with food 
and materials of manufacture, as integral a part of England 
for economic purposes as the land of Kent and Devon ? 
No ultimate solution of the land question or any other 
social problem is even theoretically possible upon a strictly 
national basis. Neither the policy which posits * land ' as 
the residual claimant in distribution, nor the policy which 
assumes that political limits are coterminous with economic 
limits, can gain any wide and permanent acceptance among 
thoughtful people." 

The first of these arguments, viz. that other classes 
have partaken even more than landowners of the immense 
growth of wealth, even if its truth were admitted, would 
furnish no valid objection to the Single Tax system. For 
the theory on which this system is based does not postulate 
that the acquisition of wealth by any individual or class 
other than landowners is impossible under the existing 
system ; nor does it assert that the acquisition of wealth 
by any individual or class is socially injurious. What it 

^ See Part II. chap. x. 

2 J. A. Hobson, "The Inflaeoce of Henry George in England," Fortnightly Review^ 
December 1897. 



4o8 DEMOCRACY VERSUS SOCIAUSM part v 

posits is, that the acquisition of wealth without equivalent 
service rendered by those who acquire it is alike unjust 
and socially injurious. If Mr. Hobson were to contend, 
which he does not, that other classes than landowners, 
monopolisers of land for special uses, and owners of tax 
monopolies have gained wealth without rendering equivalent 
service, his objection would have point. Even if this could 
be shown, as it might be shown of gamblers at the stock 
exchanges, the question would still arise whether such 
gambling in monopoly -values would be possible when 
monopoly-values have ceased to exist. As in this case, so 
in all cases, the abolition of legalised private monopoly 
must destroy not only the power of all such landowners, 
but the power of all others as well to legally obtain wealth 
in excess of services rendered by them. 

The second objection, admitting that the Single Tax 
system if generally adopted would secure equal opportunities 
for all, denies that its adoption in England alone would 
secure equal opportunities to all the inhabitants of 
England ; and posits that, owing to the world-wide 
interchange of commodities, the Single Tax system must 
be adopted in all countries before it can secure equal 
opportunities to the inhabitants of any country. This 
argument is of precisely the same character as that which 
denied the feasibility of the adoption of Free Trade by the 
United Kingdom as long as other countries refused to do 
so. It arises from the exaggeration of a well-established 
fact. Trade benefits both parties to it, and the larger 
the trade the greater the resulting benefit of each. As 
long as any country maintains laws which diminish its 
trade, it must not only reduce the prosperity of its own 
people, but the prosperity of others as well, though to a 
smaller extent. Nor does it matter whether this diminu- 
tion of interchange arises from laws directly framed for 
this purpose, or whether it arises from laws which indirectly 
achieve this result by reducing production and consumption. 

The application of the Single Tax doctrine, of the Free 
Trade doctrine, or of any other beneficial economic legis- 
lation in any one country therefore produces smaller 
results than if it were applied in all countries. But to 



CH. V SUFFICIENCY OF THE REFORM 409 

infer from this truth that the application of just and 
beneficent laws in a single country cannot produce any 
results, or even that it cannot produce great results, 
is to fall by exaggeration into untruth. If the 
general application of the Single Tax system would 
produce equality of opportunity for all men, its application 
in England must produce equality of opportunity as far 
as all Englishmen are concerned. Every inhabitant of 
England will be free to produce all the wealth his powers 
enable him to make, and will himself enjoy the whole of 
it. Likewise will he enjoy untaxed any products of 
foreign labour which he may purchase with the products 
of his own labour. If the foreigners with whom he trades 
refuse to adopt the Single Tax system, their land will 
continue to be insufficiently used, they will produce less 
wealth, and the mass of their people will consume far less 
wealth than they otherwise would. They therefore will 
have less power to purchase English goods, and if they 
have a natural monopoly in the production of any goods 
which Englishmen want, the latter will be obliged to give 
more of their own goods to obtain them. The refusal of 
other nations to adopt the Single Tax system will harm 
Englishmen to this extent, and to this extent only. But 
they have now to purchase such monopoly-goods at prices 
similarly enhanced by this cause, and in several instances 
further inflated by English customs duties ; and most of 
them have to do this while themselves receiving only 
a part of the produce of their labour. To give them the 
full produce of their labour, therefore, is a benefit to all 
Englishmen, even if other nations refuse to do the like 
to their members. If they do likewise, the benefit to 
Englishmen will be greater still. But in no way can it be 
shown that the refusal of other nations to do the like act 
of justice will deprive Englishmen of all or even of a 
major part of this benefit. 

It may, however, be held that Mr. Hobson's objection 
looks for its justification in another direction, that he is of 
opinion that largely increased wages would so far reduce 
the competitive power of English industry as to lead to 
the exclusion of English goods from foreign markets. 



4IO DEMOCRACY VERSUS SOCIALISM party 

This, however, cannot be the case. For Mr. Hobson has 
shown elsewhere with great lucidity that he agrees with 
the teaching of nearly all modem students of political 
economy, with F. A. Walker, Gunton, Schoenhof, Gould, 
Atkinson, Brentano, Schultze-Gaevernitz, and others too 
numerous to mention, that high wages tend to produce 
other results ; that they increase the consumptive power 
of a people so largely as to reduce exports to the limit of 
necessary imports without injury to local industry ; that 
they stimulate the productive power of a nation, the 
efficiency of labour and capital, to an extent which excludes 
all fear of loss of competitive power. 

He states : — 

"Our evidence leads to the conclusion that while a 
rise of wages is nearly always attended by a rise of 
efficiency of labour and of the product, the proportion 
which the increased productivity will bear to the rise of 
wages will differ in every employment. . . . Every rise 
in wages, leisure, and in general standard of comfort will 
increase the efficiency of labour ; every increased efficiency, 
whether due directly to these or to other causes, will enable 
higher wages to be paid and shorter hours to be worked." ^ 

" Though the individual self-interest of the producer 
cannot be relied upon to favour progressive wages, except 
in certain industries and up to a certain point, the col- 
lective interest of consumers lends stronger support to 
* the economy of high wages.* We have seen that the 
possession of an excessive * power to consume ' by classes 
who, because their normal healthy wants are already fully 
satisfied, refuse to exert this power, and insist upon stor- 
ing it in unneeded forms of capital, is directly responsible 
for the slack employment of capital and labour. If the 
operation of industrial forces throws an increased propor- 
tion of the * power to consume ' into the hands of the 
working classes, who will use it, not to postpone consump- 
tion, but to raise their standard of material and intellectual 
comfort, a fuller and more regular employment of labour 
and capital must follow. If the stronger organisation of 
labour is able to raise wages, and the higher wages arc 

y J. A. Hobson, TAt Evolution of Modem Caftitalim, pp. 274, 275. 



cH.v SUFFICIENCY OF THE REFORM 411 

used to demand more and better articles of consumption, 
a direct stimulus to the efficiency of capital and labour is 
thus applied. . . . When it is clearly grasped that a 
demand for commodities is the only demand for the use 
of labour and of capital, and not merely determines in 
what direction these requisites of production, shall be 
applied, the hope of the future of our industry is seen to 
rest largely upon the confident belief that the working 
classes will use their higher wages, not to draw interest 
from investments (a self-destructive policy), but to raise 
their standard of life by the current satisfaction of all 
those wholesome desires of body and mind which lie 
latent under an * economy of low wages.* *' ^ 

Whichever, therefore, is the meaning of the somewhat 
enigmatical utterance under review, it is manifest that it 
forms no valid objection to the Single Tax system ; that 
whether the latter is applied in a single country or in 
many countries simultaneously, its resmts must be great 
and beneficial. 

The writers of the Fabian Essays also raise one, and only 
one, objection to the efficiency of the Single Tax system 
as a remedy for social injustice and the resulting evils.^ 

"Ever since Mr. Henry George's book reached 
English radicals there has been a growing disposition to 
impose a tax of twenty shillings in the pound on obviously 
unearned incomes — that is, to dump four hundred and 
fifty millions a year down on the exchequer counter, and 
then retire with three cheers for the restoration of the 
land to the people. 

** The result of such a proceeding, if it actually came 
ofF, would considerably take its advocates aback. The 
streets would presently be filled with starving workers of 
all grades, domestic servants, coachbuilders, decorators, 
jewellers, lace-makers, fashionable professional men, and 
numberless others whose livelihood is at present gained 
by ministering to the wants of these and of the pro- 
prietary class. . . . The Chancellor of the Exchequer 
would have three courses open to him : — 

^ J. A. Hobson, The E'uolutim of Modem Capitalism^ pp. 282, 283. 

' Fabian Essay s, pp. 189, 190. 



412 DEMOCRACY VERSUS SOCIAUSM partv 

(i) "He could give the money back ^ain to the 
landlords and capitalists with an apology. 

(2) " He could attempt to start State industries with 
it for the employment of the people. 

(3) '* Or he could simply distribute it among the un- 
employed. 

" The last is not to be thought of ; anything is better 
than panem et circenses. The second (starting State in- 
dustries) would be far too vast an undertaking to get on 
foot soon enough to meet the urgent difficulty. The first 
(the return with an apology) would be a reducHo ad 
absurdum of the whole affair — a confession that the private 
proprietor, for all his idleness and his voracity, is indeed 
performing an indispensable economic function, the 
function of capitalising, however wastefully and viciously, 
the wealth which surpasses his necessarily limited power 
of immediate personal consumption. And here we have 
checkmate of Henry Georgeism, or State appropriation of 
rent without Socialism." 

This objection, though, or perhaps because, coming 
from the most intellectual champions of Socialism, is the 
weakest of all. For it is obviously based on the errone- 
ous assumption that a gradual absorption of rent is im- 
possible, that the whole of it must be appropriated by one 
sudden act. Its invalidity, therefore, is manifest as soon 
as it is realised that the process can be gradual ; that 
starting with a moderate tax on all land-values, this tax 
may be increased from time to time, till, after the lapse of 
a considerable period, it absorbs the whole rental-value. 
For under such conditions the disorganisation of industry, 
so graphically described by the essayist, could not occur. 
The demand of the working population for goods would 
grow at a greater rate than the demand of the monopo- 
listic classes for goods and services would decline, and 
more labour, therefore, would be absorbed in the former 
direction than could be spared in the latter. The new 
and greater demand would, it is true, be for a different 
quality of goods ; but those who are skilful enough to 
produce the superior qualities would also be able to pro- 
duce inferior qualities of the same goods ; and in any 



cH.v SUFFICIENCY OF THE REFORM 413 

case, the change in demand would arise so gradually as to 
enable even changes of occupation to be made without 
any great hardship. 

Moreover, this latter difficulty, necessary change of 
occupation, adheres to Socialism as much, and perhaps 
more, than to Single Tax. For Socialism also posits the 
gradual reduction of the wealth of the capitalistic classes 
and the gradual increase in the wealth of the workers. 
It, therefore, necessitates a like adaptation of production 
to these altered conditions. If this necessity is a valid 
argument against the efficiency of the Single Tax system, 
it is, therefore, an equally valid argument against the 
efficiency of Socialism. It is, however, invalid in either 
case. All social changes, even the most beneficial, must 
produce some temporary disturbance of existing arrange- 
ments. Such disturbance, therefore, is no valid argument 
against reforms which produce permanent benefits. All 
that may be claimed is, that the reform be introduced so 
gradually as to minimise temporary hardship. This the 
Single Tax system does to an extent which makes any 
such temporary hardship almost impossible. 



CHAPTER VI 

MR. EDWARD ATKINSON*S OBJECTIONS 

The objections urged against the Single Tax doctrine by 
two eminent economists ^ are worthy of consideration and 
examination. One of these is Mr. Edward Atkinson, 
whose numerous objections,* embodied in the following 
extracts, must be considered seriatim : — 

" The Single Tax, whatever its amount may be and at 
whatever point it may first be collected, can be but the 
taking of a part of the joint product of land, labour, and 
capitd, by due process of law, from the people who do 
the actual work by which men subsist ; such products 
thus taken from producers being applied to the consump- 
tion of those who do the necessary, but not directly pro- 
ductive, work of the Government." 

A tax on the value of land is a tax on rent. Rent is 
not received by any capitalist or labourer, but by the 
owner of the land. Even if the same person is capitaUst, 
labourer, and landowner, he still receives the rent, not on 
account of the expenditure of capital or labour on the 
land, but by virtue of being the owner. He would 
receive rent just the same if he were neither capitalist 
nor labourer. Is the landowner, as landowner, one of 
" the people who do the actual work by which men sub- 
sist " ? His only work as a landowner consists in the 
reception of rent. Is this part of the " actual work, etc." ? 

^ Precedence would have been given to the arguments urged against the justice and 
expediency of the Single Tax system by Herbert Spencer in yustia, but for the fact that 
Henry George has so fully refuted them, alas ! not without excusable bitterness, in A 
Per^exed PAiiesopAer, that further refutation is as impossible as unnecessary. 

^ ** A Single Tax upon Land," TAe Century Magaxitu, July 1890. 



cH.vi EDWARD ATKINSON'S OBJECTIONS 415 

If this question is answered in the negative, as it must be 
answered, it is admitted that the Single Tax does not take 
anything from those ** who do the actual work by which 
men subsist," but merely takes, for the common benefit, 
common property now absorbed by parasites on produc- 
tion. Mr. Atkinson is, probably, the only economist of 
any standing, living or dead, who has asserted, or would 
dare to assert, that rent is the reward for productive ser- 
vices rendered by the landowner. Such authorities as 
Adam Smith, John Stuart Mill, Cairns, Walker, and 
Marshall, as well as innumerable others, emphatically 
assert the opposite. . . . 

" Since such a tax must necessarily be the first lien 
upon the land, and must be paid year by year, even in 
advance of its cultivation or its use, for business purposes 
or dwellings ; and since the payment of this tax in money 
would of necessity become the sole condition on which 
the possession or use of land for any purpose could be 
granted by the State, it might happen that the burden 
would become too great to be undertaken, except by 
persons who already possess ample capital from which 
they could advance the taxes in anticipation of recovering 
them from the product of the land or from the income of 
their buildings. 

" Could the poor farmer, the mechanic, or the artisan 
of moderate means, or, in fact, could any who did not 
possess ample capital, afford to accept the conditional 
possession of land under such terms ? Each one who 
now occupies land can answer this question for himself by 
multiplying the present tax upon his land by five or at 
least by four." 

In making this objection Mr. Atkinson seems to have 
overlooked several obvious and important facts. The first 
of these is, that poor farmers, mechanics, and artisans of 
moderate means are not owners of very valuable land, and 
that if they want to occupy valuable land now, they have 
to pay a higher rent for the same than the tax would 
amount to on the full establishment of the Single Tax 
system. The second fact is, that in addition to a rent 
higher than the Single Tax, these poor farmers, artisans, and 



41 6 DEMOCRACY VERSUS SOCIAUSM party 

mechanics have now to pay taxes and charges of which the 
Single Tax system would relieve them absolutely, and which 
— certainly in the case of American farmers, mechanics, 
and artisans — ^largely exceed the annual value of the land 
which they occupy. The third fact is, that the Single Tax 
system, by compelling the full use of all valuable land, 
would largely increase wages. Inasmuch, therefore, as the 
Single Tax payable by the classes mentioned would be less, 
and considerably less, than one-half of the burdens which 
they now bear when using land, while at the same time 
their power to bear burdens, their wages, would be largely 
increased, it follows that the Single Tax, instead of reducing 
the power of poor persons to use land, as Mr. Atkinson 
asserts, would largely augment that power, enabling them 
to use land now far beyond their reach. 

Like results would obviously ensue in those cases in 
which poor farmers, mechanics, and artisans nominally own 
properties which are heavily mortgaged. They pay interest 
and taxes, whereas under the Single Tax system they would 
be able to occupy land of like value while paying no interest 
on purchase - money , and a single tax frequently less in 
amount than they now pay in the multitudinous taxes to 
which they are subjected. 

It may, however, be that Mr. Atkinson, when he made 
this sweeping assertion, had in his mind only that small 
minority of poor persons who own, free of mortgage, the 
land which they occupy. Such persons, under the Single 
Tax system, would have to pay a tax equal to the then 
rental-value of the land, and would only save the amount 
which they now pay in taxation. Where such taxation is 
higher than the rental-value of their land, they will be in a 
better position to occupy land. Where present taxation 
is less — a rare case — they will still be in a better position, 
on account of the increase in their wages. 

Mr. Atkinson's apprehension, however, becomes some- 
what ludicrous when the value of land usually occupied 
by such poor persons as he enumerates is considered. A 
mechanic or artisan does not generally occupy more land 
than suffices to support his cottage. Nor is his domicile 
usually to be found in those quarters of great cities where 



CH.vi EDWARD ATKINSON'S OBJECTIONS 417 

land-values are high. From ^60 to ^100 is usually the 
value of all the land occupied by cottages of which artisans 
and mechanics acquire the freehold. Even if rent is cal- 
culated at the high rate of interest of 5 per cent, such men 
would be burdened with annual payments in substitution 
for, not in addition to, present taxation of from ^3 to ^5. 

The freehold farmers of the United States own farms 
of an average value of $2000, inclusive of improvements.^ 
As the latter in new countries bear a larger proportion to 
land-values than is the case in other classes of real pro- 
perty, $1000 may be safely taken to be the average land- 
value of American farms. The annual tax payable under 
the Single Tax system by American farmers, therefore, 
would, at 5 per cent, amount to $50 or ^10, or less. 
This sum they would pay, not in addition, but in sub- 
stitution for existing taxes and undue railway charges. 
Every one of them also would thus find his burdens largely 
reduced by the Single Tax system, instead of their being 
increased as Mr. Atkinson asserts. 

Finally, Mr. Atkinson assumes that the Single Tax must 
always be paid in advance of occupation and cultivation. 
There is nothing to warrant this assumption. Local 
authorities assessing and collecting the tax will naturally 
cause it to be payable at a time which embarrasses their 
constituents least. Any one entering upon the occupation 
of waste land — of land surrendered by a former occupier — 
or taking over land under agreement with its occupier, 
will, if the land have value, pay the tax on the date fixed 
by law. This may be the day after he entered upon the 
land or twelve months later, according to the date of such 
entrance. To exact the rent in advance, which under Land 
Nationalisation may be necessary, is not only unnecessary 
under the Single Tax system, but is foreign to its spirit, and 
impracticable under the regulations which the application 
of the system imposes. Mr. Atkinson's apprehension, 
therefore, is groundless. The Single Tax system, instead 
of making it more difficult for poor men to occupy and 
use valuable land, will render it infinitely easier and more 
profitable for them to do so. 

^ Report of Bureau of Labour Statistics oflllinoisy 1894, rabject, ** Taxation," p* 131. 

2 £ 



41 8 DEMOCRACY VERSUS SOCIALISM partv 

" If this theory of a single tax on land were carried 
into effect it would probably load all desirable lots of land, 
either in city or in country, with such permanent burdens 
that none but large capitalists could thereafter afford to 
occupy them for any purpose whatever. The owners of 
capital would not then be obliged to pay any principal 
sum or capital for the purchase of land. They would, 
therefore, retain the whole of their large capital for its 
improvement, and they would thereafter secure as large an 
income from their capital only as they now derive from 
the rent of the land which they now purchase and capital 
combined.'* 

In refuting the previously cited objection it has been 
shown that the Single Tax makes it easier for poor men to 
occupy and use land. The present objection relates to 
land of great value, and first expresses a fear that such 
land will be "loaded with such permanent burdens that 
none but large capitalists could afford to occupy them." 
How can the Single Tax add to the burdens of intending 
occupiers of very valuable land ? Take a piece of land 
of a value of ^50,000. Under existing conditions the 
intending occupier may either purchase or rent it. If he 
does the former, the occupancy and use of the land is 
burdened with an annual interest charge, which, at 5 per 
cent, amounts to ^2500. If he rents the land on long 
lease his use and occupancy may be burdened with more, 
and will certainly be burdened with this same amount as 
rent. In addition, his use and occupancy is in either case 
burdened with taxes on capital or income, or both. Under 
the Single Tax system, other conditions being equal, he will 
be burdened with a smaller rent charge, say ^2000, and 
with no taxes on capital or income. Obviously, therefore, 
whatever the value of the land may be, the Single Tax 
system must reduce, and cannot increase, " the permanent 
burdens "on its use and occupancy. Smaller capitalists, 
therefore, than can now afford to do so would be enabled 
to use land of great value. 

The second objection is, that owners of capital, instead 
of paying part 01 it for land, would devote all of it to 
improvements, thus reaping as large an income as now. 



cH.vi EDWARD ATKINSON'S OBJECTIONS 419 

If this objection were urged by a socialist working man, 
ignorant of the rudiments of political economy, it might 
create no astonishment. But when it is seriously advanced 
by one of the foremost economists of the United States, 
innocent of socialistic tendencies, it shows the straits to 
which the opponents of the Single Tax theory are put. 
For it is obvious that incomes derived from the ownership 
of land and from the ownership of improvements differ 
widely in their economic and ethical character. The 
former is not a reward for services rendered, but a tribute ; 
it is deducted from the product of the national labour, 
without the recipient having rendered any assistance to 
this labour. The latter income is a reward for services 
rendered ; it is a deduction from the product of the 
national labour, generally less, and never more, than the 
value of the assistance rendered to this labour. 

Moreover, imder existing conditions capitalists do not 
always devote any great part of their capital to the creation 
of improvements. In progressive communities they run 
less risk by devoting nearly all of it to the purchase of 
land. By keeping this land idle, they, if their speculation 
is successful, obtain an equivalent to income through the 
rise in the rental-value or land due to the progress of the 
community, while avoiding the trouble and risk of seeking 
investments for surplus income. This action, keeping land 
out of use, even more detrimental to the general wellbeing 
than their appropriation of rent, may and frequently gives 
them a larger income than capitalists could obtain under 
the Single Tax system, who, with equal success in their 
speculation, had used a like amount of capital in creating 
improvements. The income obtained by capitalists who 
purchase land, therefore, is, either in part or wholly, detri- 
mental to the community; the income which capitalists 
obtain under the Single Tax system is wholly beneficial to 
the community. 

The following two objections, separated in the essay 
by other matter, are here brought into juxtaposition in 
order to show their utterly contradictory character : — 

" It matters not where the tax is first imposed — ^whether 
by a single tax on land or by multifarious taxes on other 



420 DEMOCRACY VERSUS SOCIALISM part v 

objects — this work will be distributed as a part of the cost 
of the national product, either on the whole or on the 
special products subject to taxation. Under the Single Tax 
system the tax would be distributed substantially in pro- 
portion to the consumption of all products of every kind 
by the people of every class. Taxes will not stay where 
they are put ; if they would, the tax question would be 
solved with very little difficulty." 

" Now let it be admitted that a way can be conceived 
for determining the relative value of every parcel of land 
in the United States . . . and that a tax of 5 per cent 
upon that land would yield a revenue sufficient to defray 
the entire expenses of the Government ; in such event 
substantially all rent of any kind would be absorbed by 
the tax. What would next ensue ? . . . The moment 
land ceased to yield an income or rent to the owner no one 
would pay him anything for it. The market value of land 
would no longer exist." 

If the Single Tax " will not stay where it is put " ; if it 
" would be distributed " among consumers " substantially 
in accordance with the consumption of products," it could 
not lessen the incomes of landowners. Land could not 
then "cease to yield an income or rent to the owner." 
If, on the other hand, the imposition of the Single Tax on 
land does deprive the owners of land of all income or rent, 
it is obvious that they pay the tax ; that the tax does 
"stay where it is put," and cannot be "distributed" 
among the consumers. Yet Mr. Atkinson asserts that 
both these mutually exclusive results must be expected. 

" It requires but little observation to prove that neither 
the area of land nor the value of land as now computed 
bears any positive or equal proportion to the product. In 
the production of the crude materials which are converted 
into food, or the crude fibres which are converted into 
clothing, a very large area of land is required both in ratio 
to the quantity and the value of the crude product. . 

" With respect, for instance, to wheat, the area of land 
which must be devoted to its product in a crude form — 
i.e. as grain — is very great in proportion to the area of land 
which must be occupied by either the railway, the miller, 



cH.vi EDWARD ATKINSON'S OBJECTIONS 421 

or the baker, or the dealer who distributes the bread ; yet 
the value which is added to the wheat by the work of the 
railway, the miller, the baker, and the tradesman who dis- 
tributes the bread is about two to one as compared with 
the value at the farm of the crude product of the wheat of 
which the bread is made. If land only is taxed, the farmer 
must pay the larger part of the tax or recover it from 
consumers in the best way he can devise. If he cannot 
recover it he must stop work." 

Though in the first sentence of the above quotation it 
is insinuated that the subsequent argument will take into 
account the value of land, no further notice is taken of it, 
and the conclusion is reached that " farmers must pay the 
larger part of the tax " because they use " a greater area 
of land " than subsequent manipulators of crude products. 
Two facts are overlooked : First, that farmers generally 
pay rent or interest on mortgage and taxes as well, whereas 
under the Single Tax system they would pay rent alone, 
and a smaller rent, in the form of a tax. The second is, 
that though the area of land used by farmers is larger than 
that used by railways, millers, bakers, and distributers of 
bread, the value of land used by farmers is not necessarily 
greater than that used by other classes of the population. 
As the Single Tax is to be imposed in accordance with 
value and not in accordance with area, the statement that 
" the farmer must pay the larger part of the tax " could 
only be true if farming land was more valuable than all 
the other land of a country. This is a question of fact, 
and the facts prove that the value of agricultural land 
everywhere bears but a comparatively small proportion to 
the value of all land. In the United Kingdom the annual 
value of all agricultural land, apart from improvements, is 
about ^42,000,000, or 20 per cent of the total annual 
value of land.^ Instead of paying the greater part of the 
Single Tax, agricultural land would, therefore, pay only the 
fifth part of it. 

In the colony of Victoria, agricultural land, inclusive 
of the land of country towns and hamlets, has a capital 
value of ^57,324,405 * as compared with a total land 

^ See Appendix, Table I. ' Return of GoYemment Statitt, 1893. 



422 DEMOCRACY VERSUS SOCIALISM part v 

value of ;^i45,569,cx)0.^ The value of agricultural land 
may, therefore, safely be placed at less than 35 per cent of 
that of all the land privately owned. Such land would, 
therefore, pay less than 3 5 per cent of the Single Tax, even 
in this pre-eminently ^ricultural and pastoral community, 
instead of its larger part. 

In the United States the census of 1890 returns the 
aggregate real value of farms (in round numbers) at 
$13,729,000,000 out of a total taxable real estate value 
of $46,000,000,000.* The value of farming land would 
thus appear to be just under 30 per cent of all land-values, 
and the contribution of farming land to the Single Tax 
would also be less than 30 per cent instead of " the larger 
part." It is, however, more than probable that, owing to 
undervaluation of city properties, the proportionate con- 
tribution of farmers has been overstated. 

The further assertion, contained in the last sentence of 
the preceding quotation, that the farmer must stop work 
unless he can recover the Single Tax, ^ain overlooks the 
fact that it will be imposed in substitution and not in 
addition to all the taxes and excessive railway charges 
which unencumbered freehold farmers now pay ; and that 
more than one half the farmers of the United States, 
being either tenants or burdened with mortgages,' are now 
paying more than the Single Tax in addition to all other 
taxes and charges. All the farmers, and especially Ae 
latter class, would, therefore, reap much larger incomes 
under the Single Tax system than they do now, though 
they cannot shift the tax. As they have not stopped 
work under existing conditions, it is not to be apprehended 
that they will do so when their work is so much more 
profitable. 

" If land should be taxed at its * site ' value, without 
regard to the capital or value of the buildings or improve- 
ments upon it, then the poor man who may now be in 
possession of a small house must pay as much as the 
rich man who owns a large house in the next lot of 
the same site -value, or an expensive warehouse in the 

^ See Appendix, Table IV. > Sheannan, Natural Taxattoa^ p. 184. 



CH. VI EDWARD ATKINSON'S OBJECTIONS 423 

immediate neighbourhood on another lot of the same site- 
value." 

Where poor men own a small house next door to a 
rich man's large house, the respective site-values of the land 
on which these houses stand cannot possibly be the same. 
It may be so foot for foot, but inasmuch as the large 
house necessarily occupies a greater area than the small 
house, its site- value, and the Single Tax which the owner 
must pay, must be greater than that of the small house 
and of the tax which its owner must pay. Moreover, in 
the rare cases in which land is occupied by rich men's 
houses in working men's quarters, the rich man's house is 
generally surrounded by grounds, while the poor man's 
house is not. The rich man, even in these exceptional 
cases, would, therefore, pay far more than his poor neigh- 
bours. As a general nde, however, rich men's houses are 
built on land which foot per foot is far more valuable 
than that of which poor men possess the freehold. And 
further, while the land on which his cottage stands is all 
the land and all the monopoly-right owned by the poor 
man, the rich man generally owns other land and mono- 
poly-rights besides the land on which his house stands. 
While the contribution of this poor man to the Single Tax, 
therefore, will be insignificant, that of the rich man will 
be large. 

"Their (the single taxers') m^n object would be 
attuned if land should cease to have any saleable or 
market value, as the result of the Single Tax imposed upon 
it. Yet the necessity is admitted by them that land should 
be placed in the possession of private persons in order that 
labour and capital may be applied to its use and occupancy 
for purposes of production and distribution. . . . Would 
it not become necessary for assessors to be appointed by 
the national government to establish what the Single Tax 
system calls the * site ' value of land ? How would these 
assessors determine the exact or full amount which any 
person could afford to pay for the choice of land or for 
the selection of a particular site in order either to cultivate 
or to occupy it ? 

" How could this * site ' value be established without 



424 DEMOCRACY VERSUS SOCIALISM part v 

practically leasing the land at specific or fixed rates of 
annual taxation, established so as to cover long periods of 
time ? Without such permanent possession at a fixed rate 
who would expend capital upon land ? " 

This, the last quotation from Mr. Atkinson's essay, 
embraces two objections : one, that it is practically im- 
possible to determine the value of land for purposes of 
taxation under the Single Tax system ; the other, that no 
one would expend capital on land unless the land were 
leased for long periods at a uniform rental or tax. 

As to the first of these objections, the annual value of 
land is determined by competition, and will be so deter- 
mined under the Single Tax system. The rent payable for 
houses in a given street will vary with the demand. If a 
given house, which has a building value of ^icxx), returns 
a rent of ^loo one year and of ^120 the next year, the 
local assessors know that the rental-value of the * site * and 
not of the house has increased. It is not the assessors 
who assess the site-value, but the public demand for the 
site. No difficulties, therefore, can be encountered in 
assessing this value. 

As to the second objection, it is true that few persons 
are foolish enough to expend a large amount of capital in 
improvements on land belonging to private persons unless 
they have a long lease of the land. The reason is, that 
the owner of the land, in the absence of a lease, would be 
free to confiscate the capital expended or force the tenant 
to pay rent for improvements made at his own expense. 
Both these methods of oppression have been and still are 
prevalent ; both would be impossible under the Single Tax 
system. The value on which the tax is assessed could not 
be raised or lowered arbitrarily ; improvement values could 
not be included in the assessment ; and as long as the tax 
is paid neither the present holder nor his assignees could 
be deprived of possession. The occupiers' security, being 
practically a perpetual lease at a variable rent, judicially 
fixed, would be better than the longest lease granted by a 
private owner. Therefore no one would hesitate to expend 
capital in improvements imder the Single Tax system on the 
ground that he had not a lease for a number of years. 



cH.vi EDWARD ATKINSON'S OBJECTIONS 425 

That which Mr. Atkinson pronounces impossible 
is actually being done. In the Chinese possession of 
Germany the Single Tax system has been adopted. Land 
is taxed at the rate of 6 per cent on its capital-value, im- 
provements are exempted and no other tax is levied. Re- 
assessment takes place every three years. Yet merchants 
and others have erected and are now erecting buildings 
and other improvements — ^are expending large amounts of 
capital on land, under conditions of which Mr. Atkinson 
asserts that they would make such action impossible. 



CHAPTER VII 

PROFESSOR FRANCIS A. WALICER*S OBJECTIONS 

Far more searching than the attacks of Mr. Atkinson 
are those made upon the Single Tax system by Professor 
Francis A. Walker, one of the most distinguished of 
American economists. These attacks are mainly contained 
in a small volume, Land and its Renty professedly published 
to refute Henry George's doctrines as set out in Progress 
and Poverty. Professor Walker, however, simplifies his 
task very materially. As will presently be shown, he does 
not deny the injurious influence of private property in land 
on the distribution of wealth ; he admits the injustice of 
landowners appropriating rent without rendering service 
in return. All he claims is that George has exaggerated 
the influence of rent on the distribution of wealth ; that 
the injustice involved in private ownership of land is more 
than compensated for by the advantages which it confers 
upon the community ; and that by refuting the allied 
exaggerations he has refuted the validity of the claim 
that the interests of society urgently demand the appro- 
priation for common purposes of the rent of land. 

The points in George's arguments to which Pro- 
fessor Walker addresses himself, and his manner of 
dealing with them, will be considered seriatimy and are as 
follows : — 

" Let us take up, in their inverse order, Mr. George*s 
three capital propositions. And first, how much is there 
in the view that commercial disturbance and industrial 
depression are due chiefly to the speculative holding of 
land. That land in its own degree shares with other 



CH. VII PROFESSOR WALKER'S OBJECTIONS 427 

species of property in the speculative impulses of exchange, 
is a matter of course. Everybody knows it ; no one ever 
thought of denying it. Mr. George makes no point 
against private property in land unless he can show that 
it is, of all species of property, peculiarly the subject of 
speculative impulses. Now this is so far from being self- 
evident or established by adequate induction that the 
contrary is the general opinion of economic writers. Of 
all species of property, land, especially agricultural land, 
starts latest and stops earliest in any upward movement of 
prices, as induced, for instance, by a paper-money inflation, 
which perhaps aflFords the best opportunity for the study 
of purely speculative impulses. 

" Of course, there are circumstances under which those 
impulses may especially attack land, and a wild * rig ' may 
be run in the market for this commodity, as, at other 
times, in the market for government stocks, mines or 
railways, or Dutch tulips." ^ 

Is it true that " Mr. George makes no point against 
private property in land, unless he can show that it is, of 
all species of property, peculiarly the subject of speculative 
impulses".? Suppose it were not, is it not possible that 
whereas speculation in labour-products might inflict little 
or no harm on the community, speculation in land might 
inflict infinite harm, though land were no more subject to 
speculative impulses than labour-products ? This, as a 
matter of fact, is George's position and also that of 
common sense. Speculation in wheat, for instance, holding 
it at the end of a good harvest, in the expectation that the 
next harvest may prove less plentiftil, may be cited as an 
example of speculation in labour-products which, by pre- 
serving a part of present superfluity to meet subsequent 
scarcity, is beneficial to the community. Nor can it be 
shown that, in the absence of monopoly, any speculator in 
labour-products can benefit himself without conferring at 
least an equivalent benefit upon the community. On the 
other hand, no benefit, but only injury to the community, 
can arise from speculation in land, whether it is specula- 
tion which keeps land out of use, or which " rigs " the 

^ Land and its Rentj pp. 162, 163. 



428 DEMOCRACY VERSUS SOCIALISM party 

land market in other ways to the temporary increase of 
land prices and rent. 

While Mr. Walker thus misconceives the problem 
presented to him, he similarly misunderstands the question 
which he himself puts, i.e. whether land is peculiarly the 
subject of speculative impulses. For obviously this is 
not merely a question of agricultural land, to which he 
confines it, but of all land. Which are the main objects 
of speculation at Stock Exchanges ? R^ways, tramways, 
mines, gas and water shares and similar securities, based 
on the ownership of land or special privileges to land, 
easily come first. Moreover, any inflation, whether it be 
a paper-money inflation, or any large addition to capital 
seeking investment, results first and foremost in the 
speculative rise of urban properties. Wild speculation 
in such lands, periodically recurring, can be recalled by 
any man who has passed middle age in any progressive 
country where free trade in such land exists. By far the 
greater part of land -values, therefore, are not merely 
" peculiarly the subject of speculative impulses," but arc 
pre-eminently the object of speculative transactions and 
excesses. 

The peculiarity, here apparent, of regarding agricultural 
rent as the only rent, adheres to Mr. Walker's argumenta- 
tion throughout. As is seen in the foregoing quotation, 
he even overlooks the obvious fact that mines are as much 
land as farms, i.e. apart from improvements, and disregards 
urban rents altogether. Yet, inasmuch as the value of 
agricultural land represents only a small part of all land- 
values, this treatment of the subject must necessarily lead 
to erroneous conclusions. 

" We now come to Mr. George's second count. The 
allegation that the enhancement of the value of land, above 
what should be regarded as the capitalised value of its 
present productive or income-yielding power, withdraws 
large bodies of land from cultivation, thus driving labour 
and capital to poorer and more distant soils, in order to 
secure the needed subsistence of the community, can only 
be characterised, so far as all the agricultural uses of land 
are concerned, as a baseless assumption, for which not a 



cH.vii PROFESSOR WALKER'S OBJECTIONS 429 

particle of proper statistical proof can be adduced, and 
which is directly contrary to the reason of the case. 

" Because, forsooth, a man is holding a tract of land 
in the hope of a rise in its value years hence, does that con- 
stitute any reason why he should refuse to rent it, this 
year or next, and get from it what he can, were it not 
more than enough to pay his taxes and a part of the 
interest of the money borrowed, to * carry' the pro- 
perty ? " ' 

In a footnote to page 165, Mr. Walker says further : 
" It will be observed that in the extracts quoted it is culti- 
vation which is spoken of." Yet, strange to say, while 
drawing the attention of his readers to this fact, he himself 
has forgotten it. For all his argument is directed to show 
that the speculative holders of agricultural land would 
sooner let it for a small amount than keep it idle. Yet 
that is not the problem. It is whether these holders will 
invariably let the land for cultivation, instead of letting it, 
or themselves using it, for inferior purposes, say the 
grazing of sheep or cattle. For if valuable land, fit for 
cultivation and near to markets, is largely used for this 
inferior purpose, then the consequence urged by George 
and which Mr. Walker endeavours to disprove must 
follow ; labour and capital must be driven to the cultiva- 
tion of poorer and more distant soils. 

Is the existence of these conditions "a baseless 
assumption " " directly contrary to the reason of the 
case " ? Every new and progressive country exhibits 
them. The most fertile and one of the best watered 
provinces of the colony of Victoria is known as "the 
Western District." It runs along the coast from the 
Port of Geelong, past those of Warrnambool and Port 
Fairy, to that of Portland. Two railway lines traverse 
it from end to end. Land there, though very little 
improved, averages over ^10 per acre in value, and con- 
siderable tracts have changed hands at from ^25 to ^40 
per acre. Yet this land, held in large areas, and other 
land like it, have been used almost solely for grazing pur- 
poses, while intending farmers were compelled to traverse 

^ Land and its Rtnt^ pp. 164, 165. 



430 DEMOCRACY VERSUS SOCIAUSM part v 

its length in their search for land. They found it in 
what are known as the Wimmera and Mallee provinces, 
where a scanty rainfall slightly moistens land of poor 
quality, and so distant from markets and ports that cart- 
age and railway charges consume nearly all the profit 
which the farmers' labour can wring from the ungratcfiil 
soil. Land here, though far more highly improved than 
that of the Western District, has a value of from los. to 
^3 per acre. Is not in this instance labour and capital 
driven to poor and distant lands, because the owners of 
the nearer and far more fertile land refuse permission 
for its cultivation ? Yet the rent which farmers would be 
willing to pay, and in some exceptional instances do pay, 
for this land, largely exceeds the return which it yields as 
grazing land. 

Nor is this condition peculiar to this district or to 
Victoria. It prevails in all the Australian colonies, except 
where the imposition of taxation upon the value of land 
has, as in New South Wales and still more in New 
Zealand, forced the owners of valuable grazing properties 
to let or sell the most valuable of them for superior 
uses. 

Nor is this all. In the business quarter of every city 
hovels may be seen by the side of palaces. The owners 
will not improve or cannot afford to improve their hold- 
ings to the extent which business requires. As a con- 
sequence traders are forced to take premises farther away 
from the centres of trade. The margin of production being 
thus lowered, rent is increased as much as by the lowering 
of the agricultural margin. 

In new countries many building lots within the limits 
of towns and cities are kept idle, frequently in the most 
desirable situations, enforcing an extension of the city 
limits and a further increase of rent. 

Around all cities, much land, fit for the intensest 
culture, is kept idle for speculative purposes. Users will 
only take it on long leases, owing to the valuable improve- 
ments which intense culture demands. Owners refuse to 
grant such leases, because it might deprive them of the 
opportunity to sell the land for building purposes. Similar 



cH.vii PROFESSOR WALKER'S OBJECTIONS 431 

conditions, modified by entail, exist in Great Britain, as 
the report of the Royal Commission on the Housing of the 
Working Classes ^ previously quoted from proves. 

Similarly, large areas of mining land are everywhere 
held out of use for speculative purposes. To such an 
extent is this practice carried, that a special term " shep- 
herding" has been invented for it. Combinations for 
raising the price of mineral products, moreover, like the 
Copper Trust lately formed in the United States, can only 
succeed in their nefarious object by restricting the output, 
either keeping mines idle, or what comes to the same 
thing, reducing the output of mines. If they succeed, the 
value of all such mines rises, not the value of the improve- 
ments, but the value of the mining land. 

Fixing his gaze upon the least valuable land, agri- 
cultural land, alone, Mr. Walker has overlooked all these 
cases in which speculation induces the idle holding of 
much of the most valuable land in the community, enor- 
mously increasing rent, reducing wages, and intensifying 
many of the worst evils of our civilisation.* 

1 See Part V. chapter v. 

' On loth February 1899, Mr. E. J. C. Morton, M.P. for Devonport, referring in 
the Home of Commons to the condition of this town, in support of an amendment to 
the Address, in favour of land-value taxation, made the following statement : — 

** The case which I want to bring before this House is not a case where the grievance 
is that the inhabitants cannot purchase or become possessed of their holdings. It is a 
case where there is a fiunine in land, and where the difficulty is to get the land on 
which holdings can be built : where you actually have land held up by the landlord 
for the purpose, and with the intention, and effect, of running up the rent of the 
remainder. ... 

** I have had experiences, in the course of going through my own constituency, which 
are absolutely heartrending. I know one street of fifty-one houses with an average of 
a whole fiunily for every room in it. I have gone into houses in which, going up the 
stairs, one is afraid that one would put one's foot through the wood — through the actual 
staircase — so absolutely rotten is the fabric. There I have found in one room a husband, 
wife, and five children. On the same landing, in the only other room on that landing, 
I have found the father of a family, an elderly man, and his wife, and a married 
daughter and her child living in one room, in which they have to do all their cooking 
and all their washing. They are living under conditions in which morality itself would 
appear to be almost impossible, and yet — and, to my mind, that is the most dreadful 
feature of the case — these people who exist in this condition are decent people — ^they 
are respectable people — and I have actually had people living like this come to me and 
beg me not to tell of the conditions under which they live, because they are ashamed of 
it themselves, and yet these conditions are absolutely inflicted upon them against their 
will, and without any remedy being possible by their exertions or the exertions of any 
one else, excepting the exertions of this House." 

On the same occasion, Mr. Flynn, M.P. for Cork, North, stated : — 

** If there is one thing more than another which has tended to keep many of the 
towns of Ireland in that backward, wretched, and dirty condition which so unfavourably 
impresses visitors and every traveller through it, it is the system of ground landlordism 



432 DEMOCRACY VERSUS SOCIAUSM partv 

Mr. Walker's third and last point of attack is in- 
geniously chosen. George states : " Irrespective of the 
increase of population, the effect of improvements in 
methods of production and exchange is to increase rent," 
and " the necessary result of material progress, land being 
private property, is, no matter what the increase of popula- 
tion, to force labourers to wages which give but a bare 
living." 

These and similar expressions of the same idea are 
selected by Mr. Walker as the central point of the Single 
Tax doctrine ; this he declares to be " Mr. George's main 
proposition, the proposition to which the others are sub- 
sidiary." The acumen with which Mr. Walker has 
selected the most debatable point in Progress and Poverty 
is admirable, but even if he had succeeded in disproving 
it, the main part of the Single Tax doctrine would remain 
unaffected. For were it shown, as Mr. Walker endeavours 
to show, that rent does not increase through progress in 
methods of production when population remains stationary ; 
that under these conditions wages may rise permanently in 
spite of private ownership of land, the question would still 
be. Can a permanent rise in wages take place through im- 
provements in productive methods, when population does 
not remain stationary, when it is increasing in numbers ? 
This is the actual condition accompanying progress in 

which enables one landlord to hold the land of an entire town in his grasp, and to 
refuse to part with it for building purposes except on the payment of enormous fines. 
There is no escape, under such circumstances, from increased rents when the leases fall 
in. There is nothing more depressing than to drive into an average Irish town and 
see the tottering cabins, on which no sane man would think of laying money out, 
because of the precariousness of the tenure, and the certainty that improvement would 
result in profit, not to the man who made the improvement, but to the ground 
landlord." 

Mr. Asquith, M.P., confirmed these statements, as follows : — 
** Take any of our great towns where the ownership of the soil is, as is very often 
the case, in the hands of the single individual. What is the case there ? In the first 
place, the owner may capriciously, or from a mistaken sense of his own interest, or a 
thousand and one other motives, refuse to allow the use of his land for building and 
other purposes — land which is absolutely necessary for the due development of the 
community ; and he may hold back that land from the market in the hope that at 
tome distant date he would obtain for it an increased value. In the meantime there 
is no power vested in the community to obtain the land, which is so essential to its 
life and health ; and while that land is lying idle it does not contribute, under our Uw, 
a single penny to defray the growing expenses of the community. Is that an exaggerated 
description of the existing state of things ? That it is possible under an existing law 
nobody disputes ; it appears in case after case, town after town, and is within the 
experience of hundreds of honourable Members of this House.'' 



cH.vii PROFESSOR WALKER'S OBJECTIONS 433 

production ; and if private rent, under these conditions, 
deprives the masses of the people of all participation in 
industrial progress, of any share in the increased produce 
of their labour, or if it deprives them only of a large share, 
justice and humanity alike demand the abolition of the 
private possession of rent. 

Granted, therefore, that it were proved that George 
somewhat exaggerated the facts of the case, his main 
proposition would remain unaffected. Let us now see in 
how far Mr. Walker succeeds in establishing such ex- 
aggeration. He endeavours to do so by two methods : 
first, by citing " plain facts of common observation, and 
by unimpeachable testimony of industrial statistics"; 
second, by " the reason of the case." 

Under the first head he cites ^statistics of wages of 
agricultural labour in England to show that " the labourer 
has gained in wages through the labour-saving inventions 
and impro\jements of modern times," and quotes from 
Professor Emile de Laveleye to show that profits and 
interest have increased more than rent. 

First as to wages. The Single Tax doctrine does not 
involve the proposition, and George does not allege that 
wages may not rise for a time under the impetus of a 
continuous progress in production, especially when accom- 
panied by a large exodus of population, such as has taken 
place during the time adduced by Mr. Walker, i.e. between 
1770 and 1870 in England. The question is. How long 
could labour retain any portion of the result of an improve- 
ment in production when all land is private property ? Mr. 
Walker himself, as will presenUy be shown in fuU, states 
that " economic rent tends to increase with the growth of 
wealth and population." Improved methods of production 
invariably result in increase of wealth, therefore, as Mr. 
Walker admits, in increase of rent. Rent, however, 
increases slowly through competition. Where, therefore, 
progress in productive methods is continuous, as it has 
been in Great Britain during the last century ; where, at 
the same time, a large continent, not yet appropriated, 
diminishes the local competition for land by withdrawing 
millions of workers from the labour market, rent advances 

2 F 



434 DEMOCRACY VERSUS SOCIALISM part v 

at a slower rate than productive power, and a margin 
always remains which can be divided between labour and 
its employers. But should such progress come to an end, 
or should it materially slacken, rent will inevitably over- 
take the increased productive power and wages and profit 
must fall again — all the quicker if no more free land fit 
for settlement by labourers were available. 

In setting forth the reasons which explain the increase 
of wages in Great Britain in conformity with the Single Tax 
doctrine, no notice has been taken of those legislative 
enactments which, like the abolition of the Corn Laws and 
of protective legislation generally, have largely reduced the 
exactions of monopoly. Yet that they have materially 
assisted in increasing the amount of wealth for which 
British labour exchanges at the present time would not 
have been denied by Mr. Walker. 

The second point, that regarding capital, ^is made 
in the following quotation from Professor Emile de 
Laveleye : — 

"Who occupy the pretty houses and villas which are 
springing up in every direction in all prosperous towns ? 
Certainly more than two -thirds of these are fresh 
capitalists. The value of capital engaged in industrial 
enterprise exceeds that of land itself^ and its power of 
accumulation is far greater than that of ground rents. 
The immense fortunes amassed so rapidly in the United States^ 
like those of Mr. Gould and Mr. Vanderbilt^ were the results 
of railway speculation and not of the greater value of 
land. 

" We see, then, that the increase of profits and of 
interest takes a much larger proportion of the total value 
of labour, and is a more general and powerful cause of in- 
equality than the increase of rent." ^ 

Apart from the question whether profit and interest 
could be as high as they are in the absence of the oppor- 
tunity of investing in monopolies, it is clear that the same 
considerations which account for the temporary increase of 
wages also account for the temporary increase of capitalist 
earnings. But there arises here the question. What is 

^ Land and its Renty p. 169. (The italics are mine.) 



cH.vii PROFESSOR WALKER'S OBJECTIONS 435 

capital ? De Laveleye, and with him Mr. Walker, have 
evidently mistaken land and monopoly values, and the 
opportunity for speculation which these afford for capital, 
as the italicised portions of the preceding quotation proves. 
They have, similarly, overlooked the patent fact that 
while many of the owners of "the pretty houses and 
villas " may have rendered services equal in value to the 
wealth obtained by them, which landowners do not, the 
rest, perhaps the majority, may own their wealth by virtue 
of monopoly-rights, either through increase in the rental- 
value of urban land, or through speculation in mines, rail- 
ways, gas and water shares, and similar privileges connected 
with land. In any case, the misconception, made patent 
in the above quotation, as to what constitutes capital, 
deprives the demonstration of any argxmientative value. 

Let us now turn to the reasons or the case as stated by 
Mr. Walker : " It is not only true that an increased 
production of wealth may involve an enhanced demand for 
labour as well as for land, but it is also incontestably true 
that the increased production of wealth rarely if ever 
causes an increased demand for land without a correspond- 
ing demand for labour ; while, on the contrary, an increased 
production of wealth may cause an enormous increase in 
the demand for labour without enhancing the demand for 
the products of the soil in any degree whatsoever. 

" Here is a pound of raw cotton, the production of 
which makes a certain demand or drain upon the land. 
To that cotton may be applied the labour of an opera- 
tive for half an hour, worth, say, 5 cents. Successive 
demands for the production of wealth may lead to the 
application of, first a full hour's labour, then of two hours, 
then of three, four, or five ; finer and finer fabrics being 
successfully produced, until at last the pound of cotton 
has been wrought into the most exquisite articles. Mr. 
George says that the whole eflFect of any increase of 
wealth is to enhance the demand for land. Here is a 
large increase in production — twofold, threefold, tenfold, 
perhaps, with no additional demand or drain upon the 
soil. 

" But I go further, and assert, without fear of contra- 



i 



436 DEMOCRACY VERSUS SOCIAUSM part v 

diction . . . that the enhancement in the demand for 
land, in the progress of society, habitually falls short of 
the enhancement of the demand for labour, the increase of 
production taking two great forms — one which involves no 
increase whatever in the materials derived from the soil ; 
the other in which the increased demand for land falls 
short, generally far short, of the increased demand for 
labour." 

As an example of the first kind, Mr. Walker again 
adduces that of the cotton increased in value by successive 
doses of labour, and several others of the same kind. 
No example is given to sustain the second statement. 

Let us rest here and see what all this comes to. The 
question is whether, " irrespective of the increase of 
population, the effect of improvements in methods of 
production and exchange is to increase rent," and it is 
agreed that if improvements in methods of production do 
not add to the demand for land, no such increase of rent 
can take place. Mr. Walker, however, has again mis- 
understood the problem. Not " increase in the production 
of wealth " is in question, but improvements in methods 
of production, i.e. improvements which enable the same 
labour to produce more wealth or which enable the same 
amount of wealth to be produced with less labour. The 
facts on which he relies, therefore, are not to the point ; 
nay, they do not even show that a greater production of 
wealth has taken place. For obviously, had the same 
labour been devoted to the production of a greater quantity 
of cotton goods of inferior quality instead of making a 
smaller quantity of superior quality, the production of 
wealth might have been the same or greater. What he 
has shown, therefore, is that labour may be directed to 
produce the same amount of wealth from a smaller 
quantity of raw material, thus reducing the demand for 
land and for labour in the cultivation of land. That has 
not been disputed, nor is such a change in the direction 
of labour an " improvement in the methods of production/' 
Cotton has been worked up to the finest cloth ; wood has 
been converted into highly-priced furniture; Lucullian 
dinners have been prepared from a time beyond the 



cH.vii PROFESSOR WALKER'S OBJECTIONS 437 

memory of man. What is meant by " improvements in 
methods of production " is not in dispute. They consist 
of those inventions and discoveries which increase the pro- 
ductive power of labour, either in enabling the same 
labour to produce more raw material or to convert more 
raw material into finished products, or, to a much lesser